What’s Next for Tesla Stock as Shareholders and Wall Street Pros Weigh In

Although Tesla (TSLA) shareholders voted to reinstate Elon Musk’s pay package on Thursday afternoon, some investors and analysts told Yahoo Finance they remain skeptical.

“The whole thing is a game of chicken and shareholders blinked,” said early Tesla investor Ibrahim AlHusseini. “The fear of loss is a great motivator and Elon used this psychological mechanism to his advantage.”

The venture capitalist said he voted half-heartedly in favor of the $56 billion package.

“The deal was made in 2018 when the milestones seemed virtually impossible and he achieved them,” said AlHusseini, who first invested in Tesla in a Series C funding round. “He made a deal, he delivered, and this It’s your reward.”

Tesla shares are down nearly 30% year to date and were down about 2.5% on Friday. Now that voting is over, AlHusseini said shares should remain stable until the next quarterly earnings, where he predicts “shares will fall due to another failure in deliveries and margin.”

Tesla said 77% voted in favor of Musk’s salary package. According to the document, investors who held 1.76 billion shares voted to approve the deal, while 528.9 million shares voted against. 20.6 million shares did not vote.

“I just want to start by saying, damn, I love you,” Musk said on stage at the shareholder meeting. The package, made up of options, was originally valued at up to $56 billion but is now worth about $46 billion due to a drop in Tesla’s market capitalization.

In January, Delaware Court of Chancery Judge Kathaleen McCormick ruled that the original salary package, which was approved by 73% of those voted in 2018, was not negotiated fairly.

The vote to reinstate the package does not necessarily mean Musk will receive the historic payment. A yes vote does not resolve the legal challenge and is unlikely to change the judge’s mind. Legal experts say the final decision will be up to the Supreme Court and the Delaware Court of Chancery.

New York City Comptroller Brad Lander, who was among the shareholders who called for a vote against the package, calls the approval “a mistake.” Lander abroad owns several pension funds that own about 3.4 million Tesla shares.

“We’ll see how Musk moves forward, if that leads him to focus on Tesla and develop clear growth plans,” Lander told Yahoo Finance. “But if this becomes more of a battle, distraction, Twitter rivalry and more ego – that won’t be a good thing.”

Tesla’s largest outside institutional shareholder, Vanguard, was instrumental in approving the deal. Vanguard, which owns 7% of Tesla shares, initially voted no in 2018, citing concerns about size relative to the company’s performance.

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Longtime Tesla investor Ross Gerber questioned Vanguard’s decision. “Index funds are supposed to represent the public and often have corporate governance expectations for companies. It seems a little strange that they voted for the salary package and said it aligns with shareholder incentives – which it does, but at an exorbitant amount,” he told Yahoo Finance.

Gerber, who co-founded the investment firm Gerber Kawasaki, voted yes in 2018, but this time he argued no. He began investing in Tesla in 2014 and his company held 332,000 shares as of March 31.

“The package is outrageous and its performance has been horrible over the last three years,” Gerber said. “But I believe in elections, so if that’s what the shareholders want, fine.”

Investors also approved a proposal to reincorporate Tesla from Delaware to Texas, which Musk pushed after the judge voided his salary agreement.

“That’s part of the distraction problem,” Lander said. “Delaware has a relatively conservative set of laws that are the basis of shareholder capitalism. To then pack up your marbles and move to Texas because you’re upset with a judge who said you have to follow the rules, the question is how are you going to restart?

Lander says he sees a solid foundation for Tesla to build on despite some worrying signs, adding that they have no immediate plans to change their investment strategy.

“Elon deserves a lot of the credit,” Lander said. “It’s not a $56 billion share, but a very large share.”

Analysts say shareholders’ decision to restore Musk’s compensation package is a win for investors.

Canaccord Genuity Managing Director George Gianarikas, who has a Buy rating on the stock, told Yahoo Finance he is “very encouraged” by the vote of confidence in Musk’s leadership.

“Elon Musk is fundamental to Tesla’s success in the past and future,” explained Gianarikas.

Gianarikas said Tesla’s prospects for developing fully autonomous driving set the automaker apart from competitors, putting the company in an “incredibly enviable position.”

Dan Ives of Wedbush, a longtime Tesla bull, described the approval as a “champagne popping moment” for Musk and shareholders. He said approval of the compensation package eliminates a $20 to $25 excess in shares.

“This is just the beginning of the next chapter, as Musk calls it, in Tesla’s growth story. It is one of the most disruptive names in the world,” said Ives. “It’s one of the best pieces of AI on the market.”

Ives, who warns that a negative vote could have resulted in Musk leaving Tesla, sees Tesla’s valuation surpassing $1 trillion by 2025 as Musk devotes more time and focus to the automaker.

“You’re seeing the return of old-school Musk now…Tesla needs Musk and Musk needs Tesla,” Ives added.

But Dave Harden, chief investment officer at Summit Global, warned against buying Tesla shares at this time.

“These are significant dilution possibilities for shareholders and it makes someone want to do risky things,” Harden said.

The company hasn’t proven itself in AI and robotics, and its big growth spurt in EVs has already happened, Harden argues.

“I think there will be a lot more conversation and a lot more opportunities to come in when you can clearly see that growth is going to happen,” Harden said.

“I would recommend holding Tesla and waiting. If you are in the shares, I will probably sell,” he added.

Yasmin Khorram is a senior reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and so on LinkedIn. Send interesting tips to Yasmin: yasmin.khorram@yahooinc.com

Sean Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on business, mergers, activist situations or anything else? Email seanasmith@yahooinc.com.

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