Tesla Core Retail Investors Risk Missing Annual General Meeting Vote

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Tens of thousands of international Tesla retail shareholders with around $17 billion in shares may not be able to vote at its annual meeting because investment platforms have failed to implement adequate cross-border systems.

The world’s largest electric vehicle maker has been campaigning to get investors to back two resolutions in what are likely to be close votes at its June 13 meeting: one to re-ratify the CEO’s $56 billion salary Elon Musk and another to reincorporate the company in Texas. .

This latest move is a protest of a Delaware judge’s decision to void Musk’s stock option package, the most lucrative in U.S. corporate history, due to concerns about the board’s independence.

Tesla has an unusually high proportion of retail shareholders (who own about 30 percent of the company) and the high obstacles to the success of both votes, particularly the move to Texas, will require many of them to vote in favor. Chairman Robyn Denholm has compared her task of winning the shareholder vote to climbing Mount Everest.

But many investors in Europe and Asia have found that they cannot cast their votes electronically from outside the United States because the stockbrokers and online trading platforms where they maintain their stock accounts do not have adequate systems in place.

Tesla estimates that about 3 percent of its shares could be affected, according to people familiar with the situation. That’s $16.7 billion of Tesla’s $558 billion valuation.

The vote to reinstate Tesla in Texas has a higher threshold, requiring a majority of all outstanding shares to vote in favor, meaning any votes not cast are considered against the proposal.

“Given the size of retail ownership, every individual vote counts,” one of the people said.

Tesla is working with proxy solicitation company Innisfree, which has more than 100 employees on the campaign. His tactics include calling individual investors, sending out leaflets – dubbed “fight letters” – encouraging people to vote, and a social media awareness campaign on the Musk-owned X platform.

Tesla and Innisfree have been trying to persuade brokers to implement new processes but while some have been helpful, most have not, saying they did not have time to install the infrastructure, the people said.

Hargreaves Lansdown, the UK’s largest private investment platform with $120 billion in assets and 1.7 million clients, is one of the international stockbrokers through which Tesla shareholders have been unable to vote.

“Last year we introduced AGM voting for UK and European businesses and are working on expanding that service to other overseas jurisdictions,” the company said. In the case of Tesla, “we have been working with our proxy service provider to try to facilitate this event as a one-time event. However, it has not been possible.”

HL owns most of its clients’ U.S. securities, including Tesla shares, as Crest Depository Interest, or CDI, which historically did not allow voting in the EU or the U.S. This year, Crest partnered with the fintech American Broadridge to offer such a service, but it has not yet been extended to all American securities. Despite intense lobbying from Tesla, it has not been able to install it in time for the automaker’s vote.

BNP Paribas’ Consorsbank, whose clients also represent a significant number of stocks, is another big player that does not offer proxy voting services for U.S. stocks, according to people familiar with the situation. Consorsbank was not available for comment.

Other obstacles may make retail investors less willing to vote. For example, Degiro, an online stockbroker based in Amsterdam, charges a fee of 10 euros for each shareholder who wants to vote, to cover its manual administration costs; and Switzerland’s Swissquote requires customers to call its service line.

Others have made exceptions in response to the Tesla-backed PR campaign. Swedish online bank Avanza, which does not normally offer voting services in markets outside the country, sent an email to its customers to inform them that it would allow it on an exceptional basis.

The stakes are high, and even more depends on the votes of retail shareholders after the two big proxy advisors, Glass Lewis and ISS, urged Tesla owners to vote against Musk’s pay resolution. Their opinion influences the decisions of large institutional investors. However, Tesla received “cautious” endorsement from the ISS for its re-entry in Texas.

Vanguard, Capital Group, Norway’s oil fund and State Street are among the top 10 Tesla shareholders who voted against the pay proposal in 2018, which nevertheless passed with 73 percent approval. Baillie Gifford’s flagship Scottish Mortgage Investment Trust, one of the automaker’s longest-standing shareholders with a stake in the top 15, has said it plans to back Musk’s $56 billion salary compensation.

However, the chief executive of Calpers, the largest public pension fund in the United States and a top 25 shareholder with a $1.67 billion stake, said in an interview with CNBC on Wednesday that he planned to vote against the deal. , noting that he “did not believe in compensation.” It is proportional to the performance of the company.”

Musk wrote on X in response: “Calpers broke the deal. What a shame for them, they have no honor.”

Tesla declined to comment.

Additional reporting by Sarah White in Paris

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