We're now one day away from the Tesla shareholder vote that will determine the future trajectory of the world's largest manufacturer of electric vehicles, and how it goes is anyone's guess. Will shareholders approve a controversial and legally disputed $56 billion pay package for CEO Elon Musk? And if they don't, will he really walk, as he's often implied?
That kicks off this midweek edition of our Critical Materials morning news roundup, and what a busy week it's been already. Also on tap today: we examine the fallout from Europe's stiff new tariffs on Chinese-made EVs, and General Motors' Cruise robotaxi operation gets a new lifeline. Let's dig in.
30%: Investors Big And Small Split On Musk's Pay Package
Is there a Tesla without Elon Musk at the helm?
Assuredly so. But that's the wrong question to ask. The right question is, what is the stock price of $TSLA without Elon Musk at the helm?
And that question is the one that small retail investors and huge institutional firms alike are asking as they vote on Musk's unprecedented $56 billion pay package. The results of that election will be announced at the company's annual shareholder meeting tomorrow afternoon in Austin.
We've covered the backstory on this before, so I'll spare you the details here. But I will remind you that this vote doesn't negate the Delaware judge's decision to void Musk's pay package after a shareholder lawsuit; it merely gives more ammo for Musk to secure it on an appeal or through some other means.
Plenty of investors big and small are fed up with Musk's public antics, his apparent lack of attention on Tesla as he also runs SpaceX and the social media network formerly called Twitter, and his apparent pivot away from cars toward robotaxis and AI. Other investors may agree with all of that (or they don't!) but still won't want to see the value of their $TSLA shares get wiped out. Analysts predict an immediate decline on the heels of a "no" vote, which would go even further south if Musk does leave.
Here's the latest from the Wall Street Journal, including how Musk himself has spent a huge amount of time lobbying for the vote, perhaps even more than he's spent on Tesla itself this year. Emphasis mine:
Votes have been trickling in for weeks but it isn’t yet clear if shareholders will sign off on the package, according to people familiar with the matter. It will come down to how many of Tesla’s individual investors cast ballots, and how big institutional investors vote at the last minute, the people said.
Musk himself has been campaigning to get the vote out, tweeting on his X platform and even attending meetings with some large investors that he usually skips.
[...] Musk was supposed to talk about the future of Tesla, not lobby for his compensation in those meetings, some of the people said. But when asked, Musk has addressed the compensation debate and pitched investors on why Tesla’s future relies on his presence, according to some of the people.
[...] Big institutions, which normally sway the outcome, were split in 2018 and most aren’t expected to change their votes. The vote is expected to come down to individual investors who have flocked to the stock often thanks to Musk himself.
I've been arguing lately that there are really two companies here—Tesla, the carmaker, and $TSLA, the stock with a $543 billion market cap—and more money rides on the latter than the former.
Over at Barron's, Al Root writes that the answer is fairly obvious, and it's a "yes" in Musk's favor:
“I find it puzzling that some short sellers think institutions who are long Tesla, and are active managers, would vote no on Elon’s comp plan, which will almost certainly cause Tesla stock to fall and hurt performance,” says Future Fund Active exchange-traded fund co-founder Gary Black. His fund holds Tesla stock.
He has a good point. Large institutions can’t simply trade in and out of large positions. Voting against the package amounts to shooting themselves in the foot.
A no vote could send Tesla stock plummeting toward $150, according to market technicians.
[...] Wall Street doesn’t vote, but analysts talk with clients that do. At least six brokers including Barclays and Morgan Stanley see re-approval happening. One broker, Bernstein, calls it unlikely.
That would be the short-term reaction. A no vote would force investors to consider Musk’s reaction, while leaving Tesla’s board of directors scrambling to compensate their CEO.
I do wonder how much last night's WSJ investigation into Musk's alleged sexual conduct with his female employees at SpaceX—including reportedly having a relationship with an intern—could move the needle. But at the end of the day, money talks and everything else walks.
60%: The Automotive Cold War Comes To Europe
If you haven't, I highly encourage you to read InsideEVs' report from Mark Kane this morning on the European Union's new tariffs on Chinese-made EVs. The EU's counterpunch to the slew of rising Chinese EV sales is fascinating: it shows that the government body is also hitting back on its own automakers who build in China, like BMW and Dacia, and that not every country was in favor of this plan. They all have to do business with China, after all.
While the tariffs aren't as severe as the new 100% ones imposed by the United States, they do hurt. And they're already hurting shares of European automakers as investors worry about what happens when—more like if—China retaliates. Here's Reuters:
"The tariffs have turned out to be lower than many feared and are initially a plan that can still be revised. The measures are a disaster for European car buyers and for German car manufacturers," said Frank Schwope, automotive industry lecturer at the University of Applied Sciences FHM Hannover.
"China is by far the most important sales market for all German car manufacturers. However, French car manufacturers, for whom China is an insignificant market, would benefit from measures against Chinese imports to Europe," Schwope added.
Volkswagen and BMW, down around 1-1.8%, were among the worst performers on Germany's blue-chip index. Luxury German manufacturer Porsche Holding (was down over 7% as it traded ex-dividend.
Welcome to the Automotive Cold War, Europeans. Expect it to get a lot uglier, even as the whole world grapples with inflation already.
90%: Cruise Comes Out Of Hibernation
Eight months after halting operations after a number of disastrous safety mishaps in 2023, GM's Cruise robotaxi operation seems to be... back? Get ready, Phoenix, Dallas and now Houston: it's back. Here's TechCrunch on Cruise's new $850 million investment from GM to kickstart things again:
GM’s CFO Paul Jacobson announced the capital infusion onstage at Deutsche Bank’s Global Automotive Industry Conference on Tuesday.
“This will help bridge Cruise funding until we can find the right long-term capital efficient strategy, including potential new partnerships and external funding,” Tiffany Testo, a spokesperson for the company, told TechCrunch. She declined to elaborate on the types of new partnerships or how much money Cruise hopes to raise.
[...] Patrick Morrisey, VP of corporate communications at GM, told TechCrunch that the reduction in spending is still in effect, despite today’s capital infusion.
“The total reduction in spending announced earlier is based on the fact that Cruise’s total operating costs are lower in 2024 versus 2023 (operations paused for several months, smaller fleet, fewer cities, etc.…” Morrisey said via email, noting that Cruise still needs money to advance its technology. Just not as much.
The quest for fully autonomous driving is going to be a long one, and GM isn't about to give up what it's gained so far.
100%: What Are Your Odds For The Tesla Vote?
I'm not even sure where to put the odds anymore, but my current gut feeling is there's at least a 70% chance it will pass and only a 30% chance it won't. How do you see the vote going now?
Contact the author: patrick.george@insideevs.com
