Electric vehicle maker Tesla’s (TSLA) board proposal to pay an incremental $1 trillion in compensation to CEO Elon Musk continues to draw attention from analysts. In the latest, BofA analyst Federico Merendi believes that the upcoming November 6 shareholder vote on the proposal “poses significant risk” to the company’s stock.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
According to Merendi, BofA expects TSLA stock to react unfavorably if shareholders reject the proposal and Musk resigns or devotes more attention to his other businesses.
Will Rejection of the $1T Pay Proposal Hurt Tesla?
The latest comment comes days after Robyn Denholm, Tesla’s board chair, similarly warned in a letter to investors that Musk walking away could result in significant loss of value for the automaker. Denholm noted that many investors consider the billionaire chief executive’s leadership as central to the company’s future.
The board’s hefty compensation package hinges on Musk leading the company to reach certain ambitious milestones over the next 10 years. This includes progressively expanding its market capitalization to $8.5 trillion and selling millions of the company’s robotaxis and Optimus robots.
Denholm previously emphasized that “retaining and incentivizing Elon is fundamental to Tesla…becoming the most valuable company in history.” However, the proposal has faced staunch criticism since it was put forward in early September, including from a “Take Back Tesla” campaign initiated by a group of unions and watchdog organizations.
Elon Musk Wants ‘Strong Influence’ over Tesla
Amid the criticism, pension fund and activist investor CalPERS reportedly plans to vote against the payment package. This is even as Musk, during the company’s recent third-quarter earnings call last week, fired back at critics, proxy advisory firms ISS and Glass Lewis, calling them “corporate terrorists.”
Musk continues to emphasize that he would need sufficient voting power — which the package would give him — to maintain “a strong influence” as he leads Tesla’s expansion into AI, robotaxis, and humanoid robots.
This voting power should be around “mid-20s”, he recently pointed out, adding that he needs to remain fireable if he goes “insane.”
Is Tesla a Buy or Sell?
On Wall Street, Tesla’s shares currently have a Moderate Buy consensus rating from analysts. This is based on 14 Buys, 10 Holds, and 10 Sells issued by 34 analysts over the past three months.
However, the average TSLA price target of $395.54 indicates nearly 13% downside risk from the current level.
