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Musk turns to retail politics to secure his massive pay package: Morning Brief

In Technology
May 30, 2024

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Sometimes even iconoclasts have to play nice.

To rally support for his $56 billion pay package, which a court recently struck down, Tesla (TSLA) CEO Elon Musk is offering a group of shareholders an intimate tour of Tesla’s Gigafactory.

The bit of political glad-handing comes before a pivotal vote and annual meeting on June 13 that will be seen as a referendum on his leadership.

But the play for ballots highlights a key tension in the ongoing drama surrounding Musk and Tesla.

Musk has threatened to pull major AI initiatives outside the company if he doesn’t get enough voting power to steer company decisions. But since that threat earlier this year, he has gone all-in on Tesla’s AI strategy, centering self-driving technology as the key to Tesla’s growth and identity.

The company isn’t worth anything without autonomous tech, in Musk’s vision. But that’s also a transparent threat that it won’t be worth anything without him, either.

As Musk reiterated during Tesla’s last earnings call, “We should be thought of as an AI robotics company. If you value Tesla as just an auto company — it’s just the wrong framework.”

It’s the classic argument we’ve seen play out over the past decade, like Dominos insisting it’s a tech company, not a restaurant chain. And for good reason: Tech companies get the highest valuations.

One look at Tesla’s market value compared to legacy automakers confirms this, as does the excitement and loyalty that drives Musk devotees. He’s clearly not just selling cars.

But if you buy Musk’s “beyond autos” thesis, you’re also on the hook for his “excessive” compensation and capitulation to his whims. The preacher wants his tithe.

In a recent interview with Yahoo Finance, Nvidia (NVDA) CEO Jensen Huang said he believes Tesla’s full self-driving system, which happens to be powered by Nvidia’s chips, is the most advanced system available, “far ahead” in the category.

In this light, the vote for the pay package isn’t merely about how many billions Musk deserves, but whether shareholders want to keep him interested in Tesla — a serious question for the CEO with half a dozen companies to run.

On Sunday, xAI, Musk’s AI startup, announced it raised $6 billion at a $24 billion valuation. If the Tesla vote fails, and a dejected Musk takes his AI-infused ball and goes home, we know where he’s headed.

But Musk has a fandom he can rely on too, of Tesla influencers and reply guys drumming up support to reinstate the pay package. Tesla was a meme stock before GameStop. Around 44% of Tesla’s common stock is held by nonprofessional shareholders including retail investors, according to S&P Global Market Intelligence. That’s the highest percentage among the 10 biggest companies in the S&P 500.

“Don’t delay, vote today!” Tesla urges on its website, dangling the chance to win an Austin tour with Musk. As the votes get tallied, his pay package hangs in the balance. But what he’s really after is fealty.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.

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