$Tesla (TSLA.US)$An important annual shareholder meeting will be held on June 13th local time (4:30 am on June 14th Beijing time), and this will be a meeting filled with smoke.

According to media reports, shareholders at this meeting need to vote on two major issues: CEO Musk's $56 billion compensation plan and whether the company's registration should be moved from Delaware to Texas, where its headquarters are located.

Unfortunately, just before the shareholders' meeting, Musk got into big trouble again while the sky-high compensation was still undecided. Institutional shareholder Rhode Island Employees' Retirement System accused Musk on Tuesday of using insider information to sell Tesla stocks and cash in on tens of billions of dollars in illegal profits, demanding that the court instruct him to return the profits. These issues are intertwined, making Musk's "battle of wits and courage" at this shareholder meeting the focus of investors' attention.

Musk achieves all objectives but sky-high compensation plan is rejected.

As early as 2018, a special "performance stock option award program" was approved for Musk at the Tesla shareholder meeting. If Musk could achieve all targets, he would receive 12% of Tesla's stock options as a reward, with a total value of about $56 billion. This plan is one of the most expensive executive compensations in history, but it posed a significant challenge for Musk.

It's worth noting that Musk does not receive traditional fixed wages, and his entire compensation is linked to Tesla's market capitalization and performance.

Soon after the compensation plan was announced, Tesla's market capitalization skyrocketed and exceeded $1 trillion in 2021, and Musk completed all the phase objectives as scheduled.

However, not everyone thinks Musk deserves this sky-high compensation. In 2022, Tesla shareholders sued Musk, claiming that he spent most of his energy on other companies such as SpaceX. Meanwhile, they also claimed that Musk used his control over the company and the board of directors to finalize this compensation plan. Therefore, shareholders hope to abolish this compensation agreement. But not until January of this year, did a Delaware judge declare Musk's long-term compensation plan invalid for being "unfair to shareholders."

Supporters and opponents have fiercely clashed.

Institutional shareholders are still divided over this plan. The Norwegian Sovereign Wealth Fund recently stated that it will vote against the compensation plan. According to LSEG data, the fund is Tesla's eighth-largest shareholder, holding 0.98% of Tesla's shares with a value of about $7.7 billion.

However, Musk has also received support from some institutional shareholders. Ark Invest CEO and long-time Tesla bull Cathie Wood has tweeted several times to endorse Musk, saying that he has made outstanding contributions to Tesla's rise, and shareholders should not oppose this sky-high compensation plan.

Musk tweeted that about 90% of individual investor shareholders voted in favor of his compensation plan. According to Bloomberg, this is critical because about 45% of tradable shares held by non-insiders are held by individual investor shareholders. If Musk's statistics are accurate, as few as one-fifth of institutional shareholders need to vote in favor of the compensation plan for it to pass.

In addition, according to Tesla's regulatory filings, Tesla Board Chair Robyn Denholm wrote in a letter to shareholders that if Tesla shareholders want to continue to motivate Musk to work for Tesla, it is crucial to reapprove the $56 billion compensation package previously promised in 2018. This means that if Tesla shareholders finally refuse to reward Musk with sky-high compensation, Musk may leave Tesla.

How does Wall Street look at this?

The options market shows that Tesla's stock may fluctuate by about 7% after the vote, and the price of put options is higher than that of call options, indicating that market sentiment is biased toward bearishness.

There are still differences among various institutions as to whether the sky-high compensation plan can be passed. Wedbush analyst Dan Ives expects that Musk's sky-high compensation plan will be re-approved by shareholders, and the Delaware court's previous ruling will become ineffective, and Tesla's place of registration will be moved to Texas.

Morgan Stanley analyst Adam Jones also said that according to his client survey, more than half of the respondents expect the vote to be 'in favor'. Even if the compensation plan is passed, the bullish may have been digested by the market in advance, and the short-term downside of Tesla's stock price may be greater after the results of the vote are announced.

At the same time, Bellde warned that it is possible for Musk's compensation plan to be rejected because many individual investors did not participate in the vote or simply followed the advice of proxy advisory firms.

Bernstein analyst Toni Sacconaghi expects Tesla's stock to fall 5% if shareholders vote against the plan.

Mooers,

The Tesla shareholders meeting is coming up.

Can Musk successfully 'ask for a salary'?

Editor/tolk