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Tesla asks shareholders to reapprove huge Musk pay deal

By AFP - Apr 18,2024 - Last updated at Apr 18,2024

Tesla vehicles sit on the lot at a Tesla dealership on Monday in Austin, Texas (AFP photo)

NEW YORK — Tesla will ask its shareholders in June to ratify a multi-billion-dollar 2018 pay package for CEO Elon Musk that was squashed by a US court earlier this year. 

In an SEC filing Wednesday, the board of directors for the US automaker said it "stands behind this pay package. We believed in it in 2018, as we asked Elon to pursue remarkable goals to grow the company. You, as stockholders, also believed in it in 2018 when you overwhelmingly approved it."

In January, a judge in Delaware Chancery Court voided Musk's compensation package, worth as much as $55.8 billion, ruling that the process leading to the astronomically valuable package was "deeply flawed" given Musk's deep ties to key board members who negotiated the package on behalf of Tesla. 

In a second proposal highlighted by Chair Robyn Denholm ahead of the June 13 shareholder meeting, Tesla asked shareholders to support moving the company's state of incorporation from Delaware to Texas, which "is Tesla's home," Denholm said in the filing. 

The proposals come amid a difficult stretch for Tesla, whose shares have fallen 37 per cent so far in 2024 compared with about a 6.5 per cent gain in the S&P 500. 

Earlier this week, Tesla announced it would lay off more than 10 per cent of its global workforce. 

That move comes about 10 days after Tesla reported a drop in first-quarter auto deliveries in a decline seen as reflective of rising competition among electric vehicle producers and slowing demand growth in some markets. 

"The proxy and shareholder meeting combined with the current state of affairs at Tesla all sets up for more fireworks over the coming months," said Wedbush analyst Dan Ives in a note. 

Ives said Musk needs to address market speculation that the company is shelving plans for a mass-marketed EV at a lower price point. The much-anticipated project has often been referred to as "Model 2." 

"We believe no Model 2 rollout in the next 18 months would be a disaster gamble that would likely change the growth story of Tesla the next few years," Ives said. 

Shares of Tesla rose 0.7 per cent in pre-market trading. 

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