Musk under pressure: Turbulent Tesla meeting expected

Just before the shareholder meeting, a major shareholder sued Musk for insider trading. In a lawsuit filed Tuesday, pension fund ERSRI is asking the court to order Musk to pay back billions of dollars in “ill-gotten gains” the Tesla boss made by using insider information to sell Tesla shares. 140,000 shares in Tesla.

Musk, a Tesla executive, and his brother Kimball sold a total of $30 billion (28 billion euros) worth of shares in the electric car maker in late 2021 and late 2022, the suit said, adding that news would have depressed the stock price. Filed in Delaware Chancery Court. Musk concealed plans to use his proceeds to buy social network Twitter (now X) to sell Tesla shares at artificially inflated prices.

Reuters/Michael Locisano

Kimball Musk is also a director at Tesla

Musk reportedly sold the stock despite knowing that deliveries of new Tesla vehicles were far behind official projected figures. Musk is currently under government investigation. He is being investigated over whether he violated US securities laws when he bought Twitter shares in 2022.

Sales fell for the first time in four years

Professional investors in particular are slowly losing patience with Musk and liquidating their holdings. Big investors fear that Musk is being distracted by his other ventures, SpaceX, Neuralink and X, and that his often controversial comments are damaging Tesla’s reputation and sales.

In the first quarter, the electric car pioneer’s sales figures fell for the first time in four years. On the one hand, the current weakness of the market for electric cars plays a role, and on the other hand, competition from established car manufacturers and new competitors from China is increasing.

Tesla bodies in a factory

IMAGO/ZUMA Wire/Bob Daemmrich

Physical work at the Tesla factory

Models are outdated

Additionally, Tesla’s model range is now relatively old and has gaps. Tesla has been slow to update its aging models because high interest rates on loans have dampened customers’ appetite for big purchases, the company says.

For example, Tesla will not bring a modernized Model Y to market this year. “There won’t be a redesigned Model Y this year,” Musk said at the X on Saturday, adding that Tesla continues to improve its cars, “so even six months the new car will be a little better.”

Stocks with heavy losses

Tesla, and therefore Musk, suffered as share prices plummeted. Since the start of the year, Tesla shares have lost about 30 percent of their value and are more than 50 percent from their all-time highs since 2021. Over the years, major institutional investors have accepted valuations for a technology company rather than an automaker.

Tesla Model 3

IMAGO/VCG

Tesla’s brand new Model 3

But now the tide seems to be turning. Of the 18 public funds that have held Tesla shares since 2019, ten have reduced their holdings, four by 15 percent or more, according to data from financial analysis firm Morningstar. Only five funds were purchased.

That doesn’t mean investors have already written off Tesla. Of the experts surveyed by financial services provider London Stock Exchange Group (LSEG), 19 recommended buying the stock and ten recommending selling. Tesla is the world’s most valuable car manufacturer with a market capitalization of 560 billion dollars (521 billion euros). ).

The court set aside the compensation

The old compensation package for Musk, which is due for a vote, will cause heated debate and turmoil. A $56 billion compensation package from 2018 was canceled by a court in the US state of Delaware following a shareholder lawsuit. In her ruling, Delaware Court of Chancery Judge Kathleen McCormick spoke of the “unbelievable amount of the largest compensation scheme of all time.” The package for Musk is the largest ever awarded to an executive.

Plaintiff Richard Tornetta and his lawyers argued in court that the set goals were easy for Musk to achieve. Musk doesn’t need to devote all his time to the automaker. He was only a part-time employer as he also ran SpaceX, a space rocket company.

Workers and a vehicle at a Tesla factory in Shanghai

Reuters/Ali Song

A look at the Tesla factory in Shanghai

Ex-director: Better deal for shareholders

Tesla directors said during the trial that they were paying Musk so much to ensure that one of the world’s most dynamic entrepreneurs would continue to focus on the electric car maker. Former Tesla director Antonio Gracias called the compensation package “a great deal for shareholders” as it led to Tesla’s extraordinary success.

Musk himself said in November that at the time the package deal was struck in 2017, he considered it highly unlikely that the company, which was struggling to survive at the time, would succeed. At that time he was fully focused on Tesla and in no way dictated his payment terms.

To get more of his pay, Musk campaigned ahead of a shareholder meeting with factory tours with representatives of major investors to get approval for the package in a referendum. Whether Kasthuri will succeed is unknown. Stakeholder advisers Institutional Stakeholder Services (ISS) and Klaus Lewis recently recommended voting against the package.

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