Tesla shareholders decisively backed a proposal to affirm Elon Musk’s multibillion-dollar pay package, according to details of the vote released on Friday.
The vote of confidence in Mr. Musk reduces the risk that he would leave Tesla, but may also validate behavior that some investors say has hurt the carmaker, analysts and investors said.
Passage of the proposal was announced at Tesla’s annual shareholder meeting on Thursday, without the underlying total. In the end, about 72 percent of voting shares, excluding stock owned by Mr. Musk and his brother, Kimbal, backed the pay package.
For months, many Tesla investors have worried about how engaged Elon Musk would be in running the electric car company after a judge in Delaware voided his pay package, originally approved in 2018.
The compensation plan requires Mr. Musk to hold on to the shares for at least five years before selling them, and the value of the package will continue to fluctuate before he can do so. At Friday’s closing price, the shares were worth about $47 billion.
Addressing shareholders after the vote, Mr. Musk vowed that he was committed to Tesla. The pay package, he said, “is not actually cash, and I can’t cut and run, nor would I want to.”
Tesla’s stock fell more than 2 percent on Friday, reversing some of gains made the day before, when Mr. Musk said the pay vote was set to be approved before the official results were announced. His legions of supporters online celebrated the vote, and analysts revised their reports on Tesla’s prospects.
Vanguard, whose 7 percent stake in Tesla makes it the company’s second-largest shareholder after Mr. Musk, voted in favor of the pay award despite voting against it in 2018. In a note explaining its reversal, Vanguard said that while it had been concerned about the size of the package, “the unique circumstance of evaluating the plan retroactively eliminated our concerns.”
The outcome served as a “vote of confidence in Elon,” analysts at Bernstein wrote in a note after the result. “While there remains some uncertainty around the legal process and next steps, by that standard the vote was a clear pass, mitigating concerns that Elon might leave the company or direct more of his energy elsewhere.”
The clear mandate was a disappointment to investors who hoped that the vote might put pressure on Mr. Musk to address slumping car sales or to spend less time on X, the social media platform he owns.
“I don’t think he’s learned any lessons,” said Ross Gerber, chief executive of the investment firm Gerber Kawasaki, an early investor in Tesla that has been reducing its holdings lately. “He’s going to look at this as a victory: ‘I’m going to keep doing what I’ve been doing.’”
Tesla’s board hoped that a second confirmation of the pay award could persuade the Delaware court to reverse its ruling. The judge in the case said the award was excessive and had been dictated by Mr. Musk to a board with personal ties to him.
“We believe that the ratification vote that Elon demanded and coerced is deeply flawed as a matter of law, legally ineffective and does not impact our case,” Greg Varallo, a lawyer for the disenchanted Tesla shareholders who challenged Mr. Musk’s pay in court, said in a statement.
With the pay package, Mr. Musk would own 20.5 percent of Tesla, up from about 13 percent. He has said he would like a 25 percent stake, noting in January that it would be “enough to be influential, but not so much that I can’t be overturned.” If he didn’t get a stake that large, he said, he would “prefer to build products outside of Tesla.”
Even after the rise this week, Tesla’s stock is down 28 percent this year, versus a 14 percent gain in the broader stock market. The company remains the most valuable car company by some distance, with a stock market value of $568 billion, but fears of stiffer competition and flagging demand for its models have weighed on the stock.
At the shareholder meeting on Thursday, Mr. Musk was characteristically bullish on Tesla’s self-driving technology, including a promised fleet of robotaxis, and said the company’s humanoid robot, Optimus, would grow into a multitrillion-dollar business of its own.
Market analysts are split on where Tesla goes from here, with about 40 percent rating the stock a “buy,” 20 percent a “sell” and the rest a “hold,” according to FactSet. The range of price forecasts is wide, and averages out to roughly where the stock is trading now.
Bernstein’s price target implies a 30 percent decline, and the analysts rate the stock as “underperform.” Others are more upbeat: Analysts at Wedbush think the stock could rise 50 percent from here, rating it an “outperform. The result of the vote on pay was a “pop the champagne moment,” they wrote. “Tesla is Musk and Musk is Tesla.”
Peter Eavis and Michael J. de la Merced contributed reporting.
