Tesla's Board is attempting to award Musk compensation that is obscenely unfair, using a proxy statement prepared with a flawed process and containing egregiously inadequate disclosures.
Splendid commentary, as always. It's hard for me to wrap my head around the notion that Mr. Musk is delusional enough to believe that the IDENTICAL compensation plan presented to Tesla shareholders again subsequent to another egregiously flawed process would sail through the Court of Chancery. Even IF the reincorporation in Texas was approved, a challenge would be inevitable. Perhaps this guy is starting to believe his own codswallop.
I would think (?) that the 2nd attempt of this deeply flawed process is TOTAL VALIDATION & VINDICATION for Chancellor McCormick's original findings should this case be appealed to the Delaware Supreme Court.
Well, thanks to Mr Fossi and the collaborator, we have a super clear position of the Tesla board laid bare for all to see. Lets hope the compensation package is challenged yet again, to the point it is either much reduced or denied. As many have said, circa $10,000 fee for every single Tesla built since the start of the company - in addition to previous rewards - is quite something.
A pretty stunning read, all things considered. I have a nominal number of Tesla shares, not as an emotionally driven purchase as seems to be common with this stock for some reason, but simply to exploit the unmoored-from-reality upward trend. Unfortunately I have no means of voting as my broker (Barclays) does not see fit to allow me to.
It feels to me that Tesla shareholders are doomed regardless. If the plan does not ultimately go through, Musk may well follow through on his promise to divest "AI and robotics" from Tesla. Since he's already poached staff and talks about it as a separate enterprise, this seems to be his plan regardless. He may also pay less attention to Tesla - but it's hard to imagine that scenario, since he only seems nominally interested in it since purchasing Twitter anyway.
If the plan DOES go through, somehow, then it seems clear that Elon is going to dilute shareholders as soon as he can, to spend money on things like Twitter that shareholders have no say in and derive no benefit from (quite the opposite). Since his ideas since buying it have all been uniquely terrible, and he's crushed revenue by turning advertisers away, it's safe to say it's going to continue to be a money pit.
On an emotional level there's no reason to assume awarding him this compensation will suddenly make him more focused on Tesla. He seems completely disinterested in it, and cars generally, beyond it being a piggy bank he can dip into for other pursuits (e.g. continuing to prop up Twitter).
A fiduciarily independant Board of Directors should have cut him loose some time ago.
Interesting comment, thank you. Read the jaberwock Substack piece that I linked to. Tesla shareholders may be even worse off if the 2018 Grant is somehow revived. Musk would become a massive seller of Tesla shares.
And, you're right. A real Board would never have let things come to this pass.
I am personally enjoying the ride down, if you catch my drift. If ordinary shareholders are getting the shaft, which they certainly are, it would be irrational not to profit from that pain. I know Musk reserves his greatest hatred for TSLA shorts…even more than he hates “woke” people. Happy to be on the other side of his professional corruption and toxic politics. And no, I’m not anti-EV…I own one that I love, but it’s not a Tesla!
I have never bought into any of Musk's enterprises and never will, because they are not compatible with my investing style. I have to stick to what I know: AM, KYN, TEI, RLTY, RQI, USOI. They pump out massive wads of monthly cash for me. They are probably about to take a dive just like TSLA; then I will buy more for the rebound. Anything you can buy has someone on the other end taking advantage of you. If you don't like it, then don't buy it.
I am not a fan of courts saying compensation, duly elected by shareholders is not fair. That is a slippery slope of the likes Elizabeth Warren would exploit because what is fair? We keep hearing the rich should pay “their fair share” but it is never defined.
I am not a fan of Musk but he has delivered huge shareholder value so should be compensated as voted by shareholders five years ago.
Delaware is not a fan, either. It has the business judgment rule, which almost always defers to the judgment of the Board of Directors.
It takes an extraordinary confluence of circumstances for the business judgment rule to be set aside in favor of the entire fairness standard. Here, you had a controlling shareholder negotiating with himself, directors pretending to be independent when they plainly are not, and a misleading proxy statement that informed the 2018 vote.
As for "shareholder value," it was, sorry to say, all the result of stock pumping with fraudulent promises, particularly autonomous driving and robotaxis. On the backs of that fraud, Tesla raised billions of dollars. The "shareholder value" was not durable. $1.24 trillion in market cap has melted to less than half that. And the melting will continue. Yet, this Board of Directors had no clawback to recover the stock options award that could not be earned today.
I really think you need to read the Chancellor's January 30 opinion, carefully. It's evident you have not done so.
Huge shareholder value? He's greatly underperformed the S&P since inclusion. He's left the company strategically lost and hopeless. And for that he wants compensation greater than the entire profits of the company's history? If Tesla bad a proper board, the shareholders would be protected and none of this would ever had happened. That's the issue here.
Where the controlling shareholder is the person who proposed the package in the first instance, directed the manner & timing for the Board's actions, and then allowed a misleading proxy to be sailed out, and where the compensation package was unnecessary in the first instance because he already owned 21.9% of Tesla and consequently his interests were already fully aligned with the shareholders, the compensation was by no means "fair."
Splendid commentary, as always. It's hard for me to wrap my head around the notion that Mr. Musk is delusional enough to believe that the IDENTICAL compensation plan presented to Tesla shareholders again subsequent to another egregiously flawed process would sail through the Court of Chancery. Even IF the reincorporation in Texas was approved, a challenge would be inevitable. Perhaps this guy is starting to believe his own codswallop.
I would think (?) that the 2nd attempt of this deeply flawed process is TOTAL VALIDATION & VINDICATION for Chancellor McCormick's original findings should this case be appealed to the Delaware Supreme Court.
Great comment, and I agree right down the line.
“What I see all over the place is people who care about looking good while doing evil.” — Elon Musk.
Was he looking in the mirror?
World's most famous gaslighter.
Well, thanks to Mr Fossi and the collaborator, we have a super clear position of the Tesla board laid bare for all to see. Lets hope the compensation package is challenged yet again, to the point it is either much reduced or denied. As many have said, circa $10,000 fee for every single Tesla built since the start of the company - in addition to previous rewards - is quite something.
I hope to be the lapdog of a genius some day. Until then, I will need to keep working this real job.
I take your point on all that, except the genius part. Unless you mean a genius at stock pumping.
<eating popcorn.gif>
A pretty stunning read, all things considered. I have a nominal number of Tesla shares, not as an emotionally driven purchase as seems to be common with this stock for some reason, but simply to exploit the unmoored-from-reality upward trend. Unfortunately I have no means of voting as my broker (Barclays) does not see fit to allow me to.
It feels to me that Tesla shareholders are doomed regardless. If the plan does not ultimately go through, Musk may well follow through on his promise to divest "AI and robotics" from Tesla. Since he's already poached staff and talks about it as a separate enterprise, this seems to be his plan regardless. He may also pay less attention to Tesla - but it's hard to imagine that scenario, since he only seems nominally interested in it since purchasing Twitter anyway.
If the plan DOES go through, somehow, then it seems clear that Elon is going to dilute shareholders as soon as he can, to spend money on things like Twitter that shareholders have no say in and derive no benefit from (quite the opposite). Since his ideas since buying it have all been uniquely terrible, and he's crushed revenue by turning advertisers away, it's safe to say it's going to continue to be a money pit.
On an emotional level there's no reason to assume awarding him this compensation will suddenly make him more focused on Tesla. He seems completely disinterested in it, and cars generally, beyond it being a piggy bank he can dip into for other pursuits (e.g. continuing to prop up Twitter).
A fiduciarily independant Board of Directors should have cut him loose some time ago.
Interesting comment, thank you. Read the jaberwock Substack piece that I linked to. Tesla shareholders may be even worse off if the 2018 Grant is somehow revived. Musk would become a massive seller of Tesla shares.
And, you're right. A real Board would never have let things come to this pass.
Excellent!
Zip2, Paypal, Solar City, Spacex, Tesla, Starlink, enough-said. By direct comparison, what are your irrelevant achievements? Checkmate!
I love it when cultists come here feeling spicey.
Enjoy the ride down.
I am personally enjoying the ride down, if you catch my drift. If ordinary shareholders are getting the shaft, which they certainly are, it would be irrational not to profit from that pain. I know Musk reserves his greatest hatred for TSLA shorts…even more than he hates “woke” people. Happy to be on the other side of his professional corruption and toxic politics. And no, I’m not anti-EV…I own one that I love, but it’s not a Tesla!
I have never bought into any of Musk's enterprises and never will, because they are not compatible with my investing style. I have to stick to what I know: AM, KYN, TEI, RLTY, RQI, USOI. They pump out massive wads of monthly cash for me. They are probably about to take a dive just like TSLA; then I will buy more for the rebound. Anything you can buy has someone on the other end taking advantage of you. If you don't like it, then don't buy it.
I was on the ground floor of this scam.
Fremont 2016-19
As Law said, enjoy the ride...
I am not a fan of courts saying compensation, duly elected by shareholders is not fair. That is a slippery slope of the likes Elizabeth Warren would exploit because what is fair? We keep hearing the rich should pay “their fair share” but it is never defined.
I am not a fan of Musk but he has delivered huge shareholder value so should be compensated as voted by shareholders five years ago.
Delaware is not a fan, either. It has the business judgment rule, which almost always defers to the judgment of the Board of Directors.
It takes an extraordinary confluence of circumstances for the business judgment rule to be set aside in favor of the entire fairness standard. Here, you had a controlling shareholder negotiating with himself, directors pretending to be independent when they plainly are not, and a misleading proxy statement that informed the 2018 vote.
As for "shareholder value," it was, sorry to say, all the result of stock pumping with fraudulent promises, particularly autonomous driving and robotaxis. On the backs of that fraud, Tesla raised billions of dollars. The "shareholder value" was not durable. $1.24 trillion in market cap has melted to less than half that. And the melting will continue. Yet, this Board of Directors had no clawback to recover the stock options award that could not be earned today.
I really think you need to read the Chancellor's January 30 opinion, carefully. It's evident you have not done so.
Huge shareholder value? He's greatly underperformed the S&P since inclusion. He's left the company strategically lost and hopeless. And for that he wants compensation greater than the entire profits of the company's history? If Tesla bad a proper board, the shareholders would be protected and none of this would ever had happened. That's the issue here.
I had the same question regarding "why does it matter if compensation is fair."
Simple answer:
"In general a board can pay its CEO whatever they want...
UNLESS the CEO is also a controlling sharehoder. Then the court can review the pay package for 'fairness'
"
Where the controlling shareholder is the person who proposed the package in the first instance, directed the manner & timing for the Board's actions, and then allowed a misleading proxy to be sailed out, and where the compensation package was unnecessary in the first instance because he already owned 21.9% of Tesla and consequently his interests were already fully aligned with the shareholders, the compensation was by no means "fair."
Excellent!