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Tens of thousands of Tesla’s international retail shareholders, with about $17 billion in shares, may not be able to vote at the annual meeting because investment platforms have failed to set up adequate cross-border systems.
The world’s largest electric vehicle maker has been campaigning to get investors to support two resolutions in what are likely to be close votes at the June 13 meeting: one to reratify CEO Elon Musk’s $56 billion salary and another to re-establish the company in Texas. .
The latest move came after a Delaware judge’s decision to nullify Musk’s stock option package, the most lucrative in corporate history, over concerns about board independence.
Tesla has an unusually high percentage of private shareholders – who own about 30 percent of the company – and the high hurdles to success for either vote, especially the move to Texas, will require many of them to vote in favor. Chairman Robyn Denholm has compared her task in 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 US because the stockbrokers and online trading platforms where they hold 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 equates to $16.7 billion of Tesla’s $558 billion valuation.
The vote to reincorporate 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 the retail estate, every individual vote counts,” one of the people said.
Tesla is working with proxy solicitation firm Innisfree, which has more than 100 contributors to the campaign. Their tactics include calling individual investors, sending brochures – nicknamed “fight letters” – to encourage people to vote, and a social media awareness campaign on Musk-owned Platform X.
Tesla and Innisfree have tried to convince brokers to implement new processes, but while a few have been helpful, most have not. They said they didn’t have time to install the infrastructure, the people said.
Hargreaves Lansdown, Britain’s largest private investment platform with $120 billion in assets and 1.7 million customers, is one of the international stockbrokers through which Tesla shareholders could not vote.
“Last year we introduced AGM voting for UK and European companies and expanding that service to other overseas jurisdictions is something we are working on,” the company said. In the case of the Tesla, “we worked with our proxy service provider to try to facilitate this event as a one-time event. However, it has not proven possible.”
HL holds most of its clients’ US securities, including Tesla shares, as a Crest Depositary Interest, or CDI, which has historically not allowed voting in the EU or US. This year, Crest partnered with US fintech Broadridge to offer such a service, but it has not yet been extended to all US securities. Despite intense lobbying from Tesla, it was unable to install the system in time for the automaker to vote on it.
BNP Paribas’ Consorsbank, whose clients also own a significant number of shares, is another major player that does not offer proxy voting services for U.S. stocks, according to people familiar with the situation. The Consorsbank could not be reached for comment.
Other obstacles may make private investors less likely to vote. For example, Amsterdam-based online stockbroker Degiro charges a €10 fee for each shareholder who wishes to vote, to cover manual administration costs; and Switzerland’s Swissquote requires customers to call their 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 foreign markets, has sent an email to customers informing them that they would allow this as a one-off.
The stakes are high, and even more hinge on the votes of retail shareholders after the two major proxy advisors, Glass Lewis and ISS, urged Tesla owners to vote against Musk’s pay resolution. Their opinions influence the decisions of major institutional investors. However, Tesla received “tentative” support from ISS for its readmission in Texas.
Vanguard, Capital Group, the Norwegian Oil Fund and State Street are among the top 10 Tesla shareholders who voted against the wage proposal in 2018, which nevertheless passed by 73 percent. Baillie Gifford’s flagship Scottish Mortgage Investment Trust, one of the carmaker’s longest-standing shareholders with a top 15 stake, has said it plans to back Musk’s $56 billion reward.
However, the CEO of Calpers – the largest US public pension fund and a top-25 shareholder with a $1.67 billion stake – said in a CNBC interview on Wednesday that it planned to vote against the deal, noting that it ‘didn’t believe the compensation’. proportionate to the performance of the company”.
Musk wrote in response to X: “Calpers broke the deal. Shame on you, they have no honor.”
Tesla declined to comment.
Additional reporting from Sarah White in Paris