Crypto News Today- Tesla Stock Disrupts Trend, Reaches Important Support Level Before Musk’s Pay Vote
Crypto News– Tesla (TSLA) stock took a downturn on Tuesday, breaking below a significant support level just days before the company’s annual shareholder meeting and the anticipated vote on CEO Elon Musk’s substantial $56 billion pay package from 2018.
On Tuesday, TSLA shares fell below their 50-day moving average for the first time since May 13, signaling investor caution ahead of the electric vehicle giant’s upcoming shareholder meeting later this week.
Adding to the tension, CNBC reported late Monday that the California State Teachers’ Retirement System (CalSTRS), which held about 4.7 million shares of Tesla as of June 2023, opposes Musk’s compensation deal. This announcement aligns with the sentiments of several other institutional investors.
Indeed, a significant number of institutional investors have expressed their disapproval of Musk’s 2018 pay deal, currently valued at approximately $45 billion. Norway’s sovereign wealth fund, Norges Bank Investment Management, which manages around $1.7 trillion in assets and owns nearly 1% of Tesla shares, recently announced its opposition to the proposal. This decision is consistent with their vote against the same award in 2018.
However, Musk has claimed that the majority of retail investors who have already voted are in favor of his compensation package. Back in 2018, the Tesla board secured approval for Musk’s pay package with 73% of the vote. Since April 17, when Tesla requested shareholders to ratify Musk’s 2018 pay package despite it being voided by a Delaware court earlier this year, the company has been working hard to rally support from its retail investor base.
Retail, or individual, investors currently own about 40% of Tesla shares. This is a notable shift from 2018 when institutional investors held a smaller proportion of Tesla stock. While Vanguard voted against Musk’s pay package in 2018, firms like BlackRock and many others supported it at the time.
This current vote is occurring in the aftermath of a Delaware judge ruling against the 2018 pay package, criticizing it as excessive and unfair to Tesla investors. The judge also pointed out Musk’s extensive connections with Tesla board members as a point of concern.
In addition to the compensation package, Tesla shareholders are also voting on whether to move the company’s incorporation from Delaware to Texas. This proposed move has added another layer of significance to the upcoming shareholder meeting, highlighting the pivotal nature of the decisions being made.
As the shareholder meeting approaches, the scrutiny on Tesla and Musk’s leadership intensifies, with both institutional and retail investors playing critical roles in the outcome of these pivotal votes.
Expert Opinions
On Monday, Bernstein analyst Toni Sacconaghi expressed skepticism about shareholders approving Elon Musk’s substantial pay package. In a detailed note, Sacconaghi predicted that if the proposal is rejected, Tesla (TSLA) shares could decline by more than 5%. He emphasized that the disapproval of such a high-profile compensation package could signal broader concerns about the company’s governance and strategic direction, potentially shaking investor confidence.
In contrast, Baird analyst Ben Kallo provided a more optimistic outlook earlier this week. Kallo asserted that the pay package proposal is likely to pass despite noise from select shareholders and advisors. He acknowledged the vocal opposition from some quarters but remained confident that the majority would favor the compensation plan.
Kallo also cautioned about the potential repercussions if the proposal were to be rejected. He suggested that a rejection could exacerbate worries about Musk possibly diverting his attention and resources away from Tesla’s core EV business towards his AI and robotics ventures. This, according to Kallo, would intensify existing concerns about Musk’s commitment to the company and could negatively impact the stock.
On the other hand, Kallo argued that if the pay package is approved, it might alleviate some of the market’s uncertainties regarding Musk’s focus. Approval could reduce an overhang on the stock, potentially stabilizing the share price and reassuring investors about Musk’s continued dedication to Tesla. He believes that addressing these concerns could help mitigate the persistent worry among investors about Musk’s involvement in multiple high-profile projects and his ability to effectively manage Tesla alongside his other ventures.
Both analysts highlight the significant impact that the vote on Musk’s compensation package could have on Tesla’s stock performance and investor sentiment. As the shareholder meeting approaches, their divergent views underscore the high stakes and the broader implications of the upcoming vote.
Performance of Tesla Shares
On Tuesday, Tesla (TSLA) shares dropped by 1.8%, closing at $170.66, falling below their 50-day moving average. This decline followed a 2% drop on Monday, marking a challenging start to the week for the electric vehicle giant. Prior to this downturn, Tesla’s stock had enjoyed a relatively stable period, with three consecutive weeks of closing within a narrow 1% range.
Before Monday’s decline, Tesla shares had also demonstrated remarkable stability, trading tightly for nine straight days and closing within that same 1% range. This period of consistency ended abruptly this week.
In the week prior, Tesla’s stock fell by 0.3%, ending at $177.48. So far in June, the shares have decreased by 4.5%, continuing the downward trend observed in May when they declined by 2.8%. Overall, Tesla’s stock has sunk approximately 30% since the beginning of the year.
Despite these challenges, Tesla saw a rally after reporting its first-quarter earnings and revenue on April 23. This rally helped the stock find support just above its 50-day moving average. Notably, on April 22, Tesla’s stock hit a 52-week low of $138.80, indicating a significant recovery since then, according to MarketSurge analysis.
Looking ahead, Tesla is scheduled to report its second-quarter earnings in mid-July, which could be a pivotal moment for the company’s stock performance.
Within the 35-member IBD Auto Manufacturers industry group, Tesla ranks seventh. The stock has a Composite Rating of 47 out of a possible 99, indicating a relatively weak overall performance. Additionally, Tesla’s shares hold a Relative Strength Rating of 15 and an EPS Rating of 62, further highlighting the challenges the company faces in the current market environment.
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