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Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
BlackRock and Vanguard executives are unlikely to participate in Twitter polls.
On Wednesday, Tesla shared its proxy statement ahead of its June annual shareholder meeting. The company is once again asking shareholders to vote in favor of Elon Musk’s 2018 pay package — the same one that was overturned earlier this year by the Delaware Chancery Court. The stock award is now valued at $45 billion instead of $56 billion due to the sharp decline in Tesla’s stock price.
More interestingly, Tesla is asking shareholders to let the electric vehicle maker move its headquarters from Delaware to Texas. The documents indicated that 87 percent of respondents to Elon Musk’s Twitter plebiscite in January, just after the pay package decision, favored a decision. When major institutions officially vote, including BlackRock and Vanguard, don’t expect similar support.
Tesla presented seemingly contradictory arguments in its filing. Texas corporate law, he asserts, relies on Delaware doctrines and will not interfere with shareholder rights. At the same time, he wrote: “Delaware law can be indeterminate because of its use of broad and flexible standards that are applied to individual cases in a very fact-specific manner. »
He went on to say that it made sense for Tesla to incorporate in the Lone Star State because “Tesla is all about Texas” because Tesla is “closely tied to our Texas headquarters.”
Remarkably, the company said the redomicile vote had nothing to do with the adverse ruling in the wage case, despite Musk’s continued criticism of Delaware on social media.
Texas won’t launch its new corporate law court until this year. Tesla insisted that its advisers’ analysis suggested that no discounts would be applied to any company in an untested legal environment. However, institutional investors have long favored Delaware because of its sophistication and predictability.
TripAdvisor, the Internet company that media mogul Greg Maffei is a part of, recently held a vote in favor of moving to Nevada, which unaffiliated shareholders overwhelmingly rejected. The backdrop to all of these cases is whether a powerful controlling shareholder simply wants to flee to a less stringent jurisdiction. Delaware had rejected Elon Musk’s salary plan, citing, among other things, directors who were too friendly with Musk.
For this move to take place, a majority of Tesla shareholders, with the exception of Elon Musk, must sign. Tesla has a relatively large share of retail shareholders. BlackRock and Vanguard together hold only 12 percent of all shares outstanding.
Musk likes to do what he wants. This time he asked for permission. If Tesla ends up in Texas, at least no one can pretend to be surprised by what he does next.
