Tesla Seeks Support from Retail Investors Amid Controversy

As Tesla’s annual meeting on June 13 approaches, significant shareholders are divided over Elon Musk’s $56 billion pay package.

The company is now turning to retail investors for support, who make up a significant portion of Tesla’s ownership.

This meeting is becoming a referendum on Musk’s leadership following a Delaware court ruling against the pay package.

Retail Investors’ Influence:

Retail investors, who generally favor management but often do not vote, could play a crucial role in the upcoming decision.

Tesla has launched an outreach campaign to engage these small investors, which includes a dedicated website, online influencer engagement, and factory tours for those who vote.

Despite typically low participation rates, Tesla emphasizes the importance of retail investor votes.

Key Proposals:

Musk’s Pay Package: Investors are asked to reaffirm Musk’s compensation package, which could grant him control of over 20% of the company if approved. A ‘no’ vote would be a significant rebuke with uncertain consequences.
Reincorporation in Texas: Tesla proposes moving its incorporation from Delaware to Texas.
Board Re-Elections: The re-election of two directors, including Musk’s brother, Kimbal.

Mixed Reactions from Major Investors:

Large investors are sending mixed signals:

T. Rowe Price: Supports the package, citing strong alignment with investor interests.
California Public Employees’ Retirement System: Likely to oppose the package, questioning its commensurateness with Tesla’s performance.
Norway’s Sovereign Wealth Fund: Opposes the pay package.

Retail Investors’ Perspectives:

Retail investors hold diverse opinions, which is crucial to Tesla’s strategy. Some, like lawyer Andrew Theyken Bench, support Musk’s pay package, emphasizing Musk’s role in significantly increasing their investments.

Musk claimed on his social media platform, X, that about 90% of retail shareholders who have voted support both key resolutions.

Challenges in Mobilizing Retail Votes:

Bruce Goldfarb, president of Okapi Partners, noted that while 90% support from retail investors is typical, the challenge lies in mobilizing these investors to vote.

Historically, only about 30% of retail shares were voted in 2023, compared to 80% for institutional investors.

Tesla’s Campaign Message:

Tesla’s campaign centers on fairness and respect towards Musk. Chair Robyn Denholm highlighted the need for Musk’s ideas, energy, and time at Tesla, warning that Musk’s various interests could limit his availability. She emphasized the need for reciprocal respect to keep Musk committed to Tesla.