Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[mongo]

Again, the shareholder vote was essentially voided because the board failed to give us complete, and accurate, information, preventing the shareholders from making an informed decision.

Plan: if Elon gets the full plan, share holders get $3,436.77 a share (ignoring future share offerings and employee stock compensation plans).
Seemed good to me.

 

[MP3Mike]

Does it state specifically what shareholders didn’t know? Specifically.

I think it does. Feel free to go through the 200+ pages to verify: https://courts.delaware.gov/Opinions/Download.aspx?id=359340

 

[Iain]

But how could the Tesla board assure that some random future Delaware judge doesn't void it down the road?

Or for that matter any other company's CEO compensation package.

 

[Carl Raymond]

This is a perfect chance to come up with a new bigger package with a longer time frame.
(This time hire even more expensive lawyers to judge proof it)

He’s already earned the package that’s been rug pulled.
Shareholders need to recognise that and re-award it immediately, with whatever legalese required to protect it from bad court decisions.

With another vote at the same time, establish the new package.

 

[uscbucsfan]

Greg Varallo, attorney for the investor who sued, Richard Tornetta, said the investors weren’t told that Musk himself came up with the plan or that the board’s members were beholden to Musk. Last February, Judge Kathaleen McCormick called this argument a “kill shot.”
“Defendants were unable to prove that the stockholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process,” McCormick wrote in her decision. “The defendants proved that Musk was uniquely motivated by ambitious goals and that Tesla desperately needed Musk to succeed in its next stage of development, but these facts do not justify the largest compensation plan in the history of public markets.”
One of the big questions in the case was how much of Tesla Musk controlled — and not just through his shares. “Musk wielded the maximum influence that a manager can wield over a company,” McCormick wrote.
The board of directors consisted of a lot of people who had close relationships with Musk:

• Elon Musk.
• Antonio Gracias, a member of the compensation committee and friend of Musk’s who has amassed a great deal of wealth from investing in Musk’s companies as far back as PayPal.
• James Murdoch, another Musk buddy who vacationed with Musk across the globe.
• Musk’s brother, Kimbal.
• Ira Ehrenpreis, one of the members of the compensation committee, acknowledged to the court that his relationship with Elon and Kimbal Musk had “significant influence on his professional career.”
• Brad Buss, another member of the compensation committee who “owed 44 percent of his net worth to Musk entities.”
• Robyn Denholm, a member of the compensation committee whose compensation as a Tesla board chair was more money than she made from other sources.
• Linda Johnson Rice, who appears to have been truly independent.
• Steve Jurvetson, who had a prolonged period of absence during this incident and wasn’t considered a major player by the judge.

“Ultimately, the key witnesses said it all — they were there to cooperate with Musk, not negotiate against him,” McCormick wrote.

Sounds like the board members all agreed that Musk wrote/dictated the package, that's what the judge said was dishonest to shareholders. The board members all appeared to confirm this. I can't believe that none of them said something like, "We didn't negotiate because the goal was 10x the valuation, which is difficult (near impossible) to do".

 

[Artful Dodger]

Great day for Tesla and TSLA! If this stops Elon from getting another comp package then we will be better off. He made his choice when he purchased the bird, selling TSLA and diverting engineers

Unmasked, you are.

 

[SOULPEDL]

Not silly... Does even just $1 for a CEO award now require shareholder communication and approval? What the heck is the test or the $ amount that makes it not OK? And what is the definition of "fair."

I agree, and IMO, Tesla should not appeal but just kill the package and engage Plan B already prepared. They will get my vote!

 

[powertoold]

So in order for the shareholders to make the most perfect informed decision, we need a 50-page story of all the characters, whether they're related or friends to Elon, how much money they owed each other, and whether they played hopscotch together when they were kids?

 

[Artful Dodger]

Again, the shareholder vote was essentially voided because the board failed to give us complete, and accurate, information, preventing the shareholders from making an informed decision.

So can I sue to void the last Federal Election, too? Or just Delaware? /X

 

[TSLA_Hopeful]

Are we selling shares if Elon leaves?

 

[SOULPEDL]

So in order for the shareholders to make the most perfect informed decision, we need a 50-page story of all the characters, whether they're related or friends to Elon, how much money they owed each other, and whether they played hopscotch together when they were kids?

Yup!
And the amount of the award must be at least a sh**-load, and no less.

 

[Artful Dodger]

That's right. Goog currently down 5.6%. Tsla caught up in that in addition to court ruling.

No, that just the excuse for MMs. They moved the SP to the Options Break Point* ($185) promptly. Any excuse'll do...

*Options break point is the SP price that negates the most Call contracts without going in-the-money for Puts.

 

[TSLA_Hopeful]

If one person with 9 shares can start a ****ing lawsuit and do this, then we are shareholders should be able to file a shareholder proposal to grant Elon his shares.

 

[TSLA_Hopeful]

I'm going to do it, lmk who else would like to join in.

 

[phantasms]

Are we selling shares if Elon leaves?

I'd be buying that dip hard.

 

[powertoold]

So if any of you are interested in the foundation of this judgment, you can read this:

The Delaware Way: Deference to the Business Judgment of Directors Who Act Loyally and Carefully - Delaware Corporate Law - State of Delaware

The duty of loyalty requires directors to act in good faith to advance the best interests of the corporation and not injure the corporation.

corplaw.delaware.gov

The duty of loyalty also prohibits directors from using their positions to advance their own personal interests. Delaware law requires directors to devote their loyalty to the corporation and its stockholders, without consideration to their self-interest. Thus, the duty of loyalty prohibits directors from, for example, causing the corporation to engage in an unfair transaction in which the director has an interest, taking unreasonable action to keep their director positions, or profiting from the use of confidential corporate information. Generally, the duty of loyalty forbids any action that subordinates the best interests of the corporation and its stockholders to a director’s personal motive.

If a majority of the board has a conflicting interest in a transaction challenged in court, the board’s decision may not be protected by the business judgment rule. Rather, Delaware courts will generally require the directors to demonstrate that a self-dealing transaction was entirely fair to the corporation. For that reason, the Delaware courts encourage interested directors to adopt procedural protections—like impartial and independent decision-makers—to help ensure that the transactions are fair. Further, because Delaware law seeks to protect minority investors, major corporate transactions with controlling stockholders are subject to this searching fairness review even if procedural protections have been put in place.

 

[Krugerrand]

Can someone expand on this? Here's my thought process on this:

1) The court claims Elon had too much control over his own compensation, board wasn't independent enough, the process for devising the compensation plan wasn't transparent, etc.

2) But do the shareholders really need to know the minutia of the process in order to vote on the compensation plan at face value?

3) The shareholders were voting on fairness of the compensation plan itself, not the details of how it was devised. It's like if you were deciding whether to buy a car, and all the details of the car were presented accurately, but you have no idea how the final price was determined. You don't need to know how the price was determined, you just need to decide whether you like the price or not.

4) I don't see anything deceptive about the actual compensation plan at its face value. The details of the plan itself wasn't hiding anything from the shareholders.

Additionally, I remember WEEKS of discussion on how the milestones of the plan were difficult to achieve at best and a couple of them virtually impossible in the time frame.

Any shareholder could find out the relationship Elon had or did not have with the board members of the time and if that was somehow a valid concern, they could vote no.

I personally feel this ruling and its reasons for are the biggest pile of bs I’ve seen since the SEC bs.

 

[GhostSkater]

Are we selling shares if Elon leaves?

Nope, while I think Elon is essencial for the future of Tesla, they showed more than once that behind him is a more than capable team of pushing it forward, maybe not to the same degree of madness, but vastly above what other companies are doing

 

[Stretch2727]

Can someone expand on this? Here's my thought process on this:

1) The court claims Elon had too much control over his own compensation, board wasn't independent enough, the process for devising the compensation plan wasn't transparent, etc.

2) But do the shareholders really need to know the minutia of the process in order to vote on the compensation plan at face value?

3) The shareholders were voting on fairness of the compensation plan itself, not the details of how it was devised. It's like if you were deciding whether to buy a car, and all the details of the car were presented accurately, but you have no idea how the final price was determined. You don't need to know how the price was determined, you just need to decide whether you like the price or not.

4) I don't see anything deceptive about the actual compensation plan at its face value. The details of the plan itself wasn't hiding anything from the shareholders.

What I read it basically comes down to your first point. The real issue is the independence of the board and did they really negotiate.

No board is going to put in a proxy statement that "Elon came up with this and we agreed as we are beholden to him."
So the process and the independence of the board is the concern.

Some excerpts.

But the defendants were unable to prove that the stockholder vote
was fully informed because the proxy statement inaccurately described key directors
as independent and misleadingly omitted details about the process.

The process leading to the approval of Musk’s
compensation plan was deeply flawed. Musk had extensive ties with the persons
tasked with negotiating on Tesla’s behalf.

 

[Krugerrand]

Are we selling shares if Elon leaves?

He’s not leaving.