Investor's Corner
Tesla Chair of the Board letter urges stockholders to approve Texas reincorporation
Tesla has been putting in a lot of effort into encouraging TSLA shareholders to vote for Proposals Three and Four at the 2024 Annual Stockholders’ Meeting. While previous letters that have been sent about the matter have been quite focused on Elon Musk’s compensation plan, a recent letter from Tesla Board Chair Robyn Denholm has focused on Tesla’s proposed reincorporation to Texas.
As could be seen in Denholm’s letter, Texas is already the business home for Tesla, so it only makes sense to make the Lone Star state into the company’s legal home as well. Texas is already home to Tesla’s headquarters and Giga Texas is the electric vehicle maker’s flagship production facility. As per the Board Chair, thousands of Tesla employees and some executives have also moved to Texas.
More importantly, Denholm noted that Delaware is simply no longer the right jurisdiction for Tesla, and that the company has been studying a move out of Delaware for some time. Denholm provided some benefits that Tesla could see if it was reincorporated at the Lone Star state. “We need to be incorporated in a state that we believe will protect stockholder rights while, at the same time, support the kind of innovation that has driven the strong stockholder returns you have enjoyed over the past several years. That state is Texas,” Denholm wrote.
Following is Denholm’s recent letter to TSLA shareholders.
Dear Fellow Stockholder,
Tesla has been one of the most successful enterprises of our time. In just the past six years, we created more than $735 billion’ in value for you while advancing our mission of accelerating the world’s transition to sustainable energy and driving an unmatched pace of innovation in artificial intelligence. Our next growth vector is equally as ambitious.
But the present and future value Tesla is poised to deliver for all of you is at risk. This year’s Annual Stockholders’ Meeting is rapidly approaching, and we need your vote on two important proposals:
Vote FOR Proposal Three – Redomesticating Tesla in the State of Texas
Vote FOR Proposal Four – Ratification of the 2018 CEO Performance Award
Both of these proposals are critical to our future. But today, I want to talk about Texas.
Texas is already our business home. We need to make it our legal home, too.
Redomesticating in Texas is the logical evolution for Tesla. We have moved our corporate headquarters to Texas in 2021 and in 2022, we completed our Gigafactory Texas – Tesla’s principal manufacturing facility, the production hub for the Model Y and the home of the Cybertruck and our future vehicles. Thousands of our employees as well as our executives have moved there.
Texas also has a legal regime that will enable us to advance our world-changing mission and, in turn, continue to create additional value for you.
There is value in business disputes being heard where Tesla is headquartered – the community is directly impacted by court decisions affecting our Company.
Over the last several years it has become clear that Delaware is no longer the right jurisdiction for us. In fact, we have been studying a move out of Delaware for some time. Redomesticating in Texas builds on our relationships with the state and local communities, including government actors, employees and other stakeholders, which are critical to Tesla, and reinforces our commitment to the state.
We need to be incorporated in a state that we believe will protect stockholder rights while, at the same time, support the kind of innovation that has driven the strong stockholder returns you have enjoyed over the past several years. That state is Texas.
Everything is bigger in Texas, and being in Texas enables us to dream bigger for the future, and for all of you.
Sincerely,
Robyn M. Denholm
Chair of the Board
The decision of Tesla shareholders on Proposals Three and Four will be announced at the 2024 Annual Stockholders’ Meeting, which is scheduled for June 13, 2024. The meeting will be held at Giga Texas at 3:30 PM CT. Similar to previous Tesla events, the 2024 Annual Stockholders’ Meeting will be livestreamed.
Tesla’s recent communication to TSLA shareholders can be viewed below.
Tesla Letter to Stockholders May 28 2024 by Simon Alvarez on Scribd
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Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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