Musk Says Tesla Will Hold Vote to Move to Texas: Is This a Strategic Decision or Knee-Jerk Reaction?

By Kevin Armstrong
YouTube/NYT Events
YouTube/NYT Events
YouTube/NYT Events

It appears Elon Musk is planning to move Tesla's legal domicile from Delaware to Texas, a decision fueled by a recent legal judgment. Musk took to his social media platform X to poll readers regarding Tesla's state of incorporation. There were over 1 million votes; 87% supported a move to Texas. Musk responded: The public vote is unequivocally in favor of Texas! Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.

This could be a huge knee-jerk reaction. The Delaware Court of Chancery, presided over by Judge Kathleen McCormick, delivered a ruling that nullified Musk's significant $55.8 billion compensation package, awarded by Tesla in 2018. This package, linked to performance milestones, was a cornerstone in Musk's path to becoming the wealthiest individual globally, with a net worth estimated between $198 billion and $220 billion as of November 2023. The package was also approved by shareholders.

The Delaware Dilemma, the Texas Advantage

Delaware, a haven for corporations due to its favorable tax regime and flexible corporate laws, houses numerous major companies. However, the state has come under scrutiny from Musk, who criticized it for handling corporate matters, particularly after the court's decision.

Texas presents a compelling alternative, offering more lenient regulations on executive compensation and potentially allowing for more generous CEO remuneration without the strict fiduciary constraints found in Delaware. This flexibility could significantly impact Tesla's governance and Musk's compensation strategy moving forward. However, shareholders must also consider Musk’s motivation for moving to Texas. Recently, Musk said he’d want at least a 25% stake in Tesla to continue developing AI at the company.

Shareholder Response and Corporate Governance

The decision to consider Texas as the new legal home for Tesla is not without its complexities. Now faced with a pivotal vote, shareholders must weigh the implications of such a move. The change raises questions about Tesla's corporate governance and Musk's motivations, suggesting a potential shift towards a governance model that favors executive freedom over traditional fiduciary constraints.

The transition from Delaware to Texas could have far-reaching legal and regulatory implications for Tesla. Introducing a business court in Texas, mirroring Delaware's Chancery Court, signifies Texas's ambition to become a new center for corporate litigation and governance.

Tesla's Texas Ties Deepen

The potential relocation is not Tesla's first venture into Texas. The company moved its headquarters to Austin in 2021, drawn by the state's favorable tax policies and regulatory environment. This move aligns with Musk's broader strategy of expanding Tesla's operational footprint in Texas, where it has already established a significant presence with its gigafactory. That is the Cybertruck's home and the next-gen platform's future home.

Musk's proposal to shift Tesla's legal domicile to Texas is more than a mere change of address; it represents a strategic maneuver to reshape the company's future. This move, contingent upon shareholder approval, could redefine Tesla's corporate governance, compensation practices, and legal standing, setting a precedent for other corporations contemplating similar transitions.

Tesla's Shareholder Vote Results and Shareholder Event Video [Live Now]

By Karan Singh
Not a Tesla App

Yesterday on X, Elon Musk posted that the two key resolutions for the upcoming Shareholder Meeting were both passing by wide margins – and would subsequently go on to pass at today’s Shareholder Meeting.

Musk Compensation Package and Tesla’s Move to Texas

The two key resolutions, one on Elon Musk’s performance-based compensation package, and the other on Tesla’s re-incorporation to Texas, both passed in the preliminary stages. Each required a minimum number of ‘Yes’ votes to pass at the Shareholder Meeting.

The performance-based compensation package only required a simple majority – a certain number of Yes votes, with abstentions not counting as Nos. On the other hand, the move to Texas required a full majority, with abstentions counting as Nos.

Elon Musk declared his victory on X in these two key votes, and Tesla’s share prices moved favorably in post-market, and then again in pre-market trading. This is a positive indicator for Tesla and Elon Musk. On X, Elon recently agreed that given he has received a controlling stake in Tesla, he would work towards making Tesla the most valuable company on Earth.

Other Resolutions

The first five proposals are Tesla corporate proposals, while the remainder are shareholder proposals, and are covered in the table below. For more details, you can read Tesla’s Proxy Package. The proposals are ordered below in the order of presentation.

Resolution

Status

Elect 2 Directors for a 3 Year term (James Murdock, Kimball Musk)

PASS

Non-Binding Advisory-basis Executive Compensation

PASS

Move Tesla to Texas

PASS

Elon Musk’s Compensation Package

PASS

Appoint PricewaterhouseCoopers as Tesla’s accounting firm.

PASS

Reduce Director Terms to 1 Year

FAIL

Simple Majority Stockholder Voting

FAIL

Annual Report on Anti-Harassment and Discrimination

PASS

Freedom of Association and Collective Bargaining Policy

PASS

Report on EM Radiation and Wireless Technologies, and effects on humans.

PASS

Adopting targets and reports for sustainability metrics for executive compensation

PASS

Moratorium on sourcing minerals from deep-sea mining.

PASS

Shareholder Meeting Event

You can view Tesla’s shareholder meeting below:

Tesla Likely to Launch Robotaxi Service in Next 5 Years, May Account for 90% of Future Profit

By Karan Singh
ARK Invest

Tesla is on the verge of its Robotaxi announcement event on 8/8, and major investors like Ark Invest are examining and refreshing their bull case scenarios.

Robotaxi as a Focus

Ark Invest sees Robotaxi as a focus of Tesla’s ongoing business and sees Tesla’s autonomous ride-hailing revenue to net nearly $1 trillion in 2029. In comparison, they estimate Tesla’s vehicle sales to account for $0.4 trillion in revenue. With this bull case, Ark Invest also sees Tesla’s share price soaring to $3,100 by 2029. Ark Invest’s bear case sees the share price moving to $2,000 and robotaxi netting $0.63 billion in revenue.

Ark Invest gives Tesla a 58% chance of launching its robotaxi service in 2025, and a 38% chance in 2026. It’s clear that Tesla’s future lies in operating a fleet of autonomous vehicles and the question is just when it will happen. Given FSD’s massive improvements between FSD V11 and FSD V12, there is a possibility of Tesla meeting these estimates, although a lot depends on how fast improvements will continue to come. While FSD V12 is impressive, it’s still a long way from a true autonomous vehicle.

Rate of Improvement

Miles driven by Tesla FSD versus autonomous competitors
Miles driven by Tesla FSD versus autonomous competitors
ARK Invest

Ark’s case is focused on the fact that FSD’s rapid improvement will continue, and a lot of that may be determined with the next few releases, including FSD 12.4.1, v12.5, and v12.6. When comparing Tesla to autonomous vehicles, Tesla has a drastic lead in miles driven, in fact, it’s so large that you can barely even see Tesla’s competitors. Tesla is at 1.3 billion miles driven with FSD, while the closest competitors are just reaching 15 million autonomous miles driven. While there’s a drastic difference in capabilities between Tesla’s FSD and autonomous vehicles such as Google’s Waymo, Tesla has the ability to gather data 86 times quicker.

Training data is key to building autonomous vehicles, and Tesla is currently the king of vehicle-related data.

Services Company

We previously wrote about whether Tesla’s future will be as a car company or a services company – and major investors such as Ark Invest and Morgan Stanley see Tesla’s AI services as a major driver of business in the future, and the focus of future revenue and profits.

Robotaxi, as both a service and as a physical product, has the opportunity to shake up markets in a unique way, providing quick, clean, and safe transportation between local destinations in urban areas, which could quickly outcompete traditional services like taxis, and tech competitors like Uber or Lyft. The market for robotaxi is untapped and massive, but Tesla isn’t the only one chasing the goal.

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