Elon Musk has warned us these past few weeks: The economy may be headed for a tough recession, resulting in Tesla’s operating margins possibly declining to sustain the growth objectives. Investors should stay out of margin.
I would like to add that there is - without any doubt - more drama ahead and want to prepare everyone for it. My intention and hope is that today’s post will help to lay out what’s ahead and ways to bring forward proposals to solve issues. Most of these topics will be discussed in the next five months, so better be informed, prepared and patient. For all those who don’t wish to hear anything realistic, please go back to Twitter right now.
Neither can any Uber-Bull bully me into becoming a bandwagon cheerleader.
Nor will any TSLAQ ever convince me of their lies and smears.
What follows has nothing to do with Tesla’s fundamentals which are - in my continued view - ideally positioned for the years ahead, as Tesla remains the most consequential company in the world.
Remember: there are rules in place for US-based corporations, and until laws change, only shareholder votes matter. Talk on Twitter is just that. Not even the most super-speedy and determined entrepreneur, as much as we love him, can alter these long-standing SEC rules, nor will tweets and polls make these things happen.
The following two topics will soon come to the forefront and keep us busy:
Elon’s next compensation package from Tesla, which is most certainly in the making and Ira Ehrenpreis, on Tesla’s Board of Directors since 2007 and Head of the Compensation Committee, has a crucial role here.
The preparation and tenure of the next annual Tesla shareholder meeting, which may run much less smoothly than prior ones.
We can expect Elon’s compensation plan to be one of many hotly debated subjects to vote for.
The following four Board of Director positions are also up for election in 2023:
Elon Musk
Robyn Denholm (Chairperson of the Board)
Hiromichi Mizuno (member since April 2020)
Joe Gebbia (new member)
Some shareholders are already vocal about their desire to
have a retail investor representative join the Board,
evaluate the impact of Elon’s Twitter activities on Tesla’s economics and brand image,
inquire about Elon’s method of selling stock and measure the impact on Tesla’s float, and
understand under which circ*mstances Tesla employees have been deployed to the Twitter Corporation.
The volume (number and noise) of items proposed to be included on the shareholder meeting agenda will increase in the next months, not only by retail investors, but also by institutional investors and other stakeholders. Institutional investors (43%) now outnumber retail investors (42%), with the remaining 15% being insiders.
Also keep an eye on proxy advisory firms like Glass Lewis & Co., Egan-Jones, and Institutional Shareholder Services (ISS), who have proven in the past to be very negative on Elon and Tesla (example here), will certainly try to benefit from the current turmoil, and have the ear of the Mainstream Media.
In 2022, three of the twelve proposals did not get the results the Board had recommended (see results here), and notably the proxy access for stockholders, which had previously failed in 2018, was this year approved. Interesting to know: While we do not know their votes in Tesla’s specific case, do note that BlackRock (holding currently 5.4% of Tesla shares) and Vanguard (6.75%), voted during the last 3.5 years in favor of 87% and 91% of shareholder proposals to establish proxy access.
The ESG proponents will continue to try to smear Tesla. This article by Morningstar from August 2022 summarizes how, in their view, shareholder support had already deteriorated for Tesla management proposals and voting results over the past years up to 2022. Another ESG-labeled example is here.
Be prepared, know the rules, ensure you can vote.
Annual Meeting - Calendar, Items and To Do’s
The Q3-2022 10-Q SEC filing announced the 2023 annual shareholder meeting for May 16, 2023. Much earlier than in August for year 2022, and October for year 2021.
Proposals for inclusion in a company’s proxy statement must follow certain procedures, and are already too late for the 2023 Tesla shareholder meeting now, they would have needed to be submitted by Dec 22, 2022.
Other rules to follow are:
Under SEC rules (Securities Exchange Act of 1934), the shareholder who wants to have his/her proposal included in the votes must meet certain ownership requirements: must have continuously held at least $2,000 in market value of the company's securities for at least one year before the date on which notice is given.
Then the SEC rules affirm that the shareholder must provide written notice of the proposal to the company at least 120 calendar days before the anniversary of the previous year's annual meeting.
The Tesla Bylaws add additional rules, which were further defined in the 2022 proxy filing and the 10Q filing for Q3-2022 (page 57) limiting the submissions to be included in the 2023 proxy statement to be submitted by Dec 22, 2022 at the latest.
However, a stockholder may also present at an annual meeting any business - including nominations for the election of directors - specified in a written notice properly delivered within the Notice Period, which starts on January 16, 2023 and ends on February 15, 2023.
These proposals have to
be addressed in writing,
describe the proposal and its reason,
be in the name and address of the proposer
include the number of shares that are held, incl. derivate positions, by the proposer
state whether (and how much) hedging has been entered into (incl. short positions or borrowing / lending of shares) by the proposer
value the effect (or intent of) which the proposal might have to mitigate loss to, or manage the risk or benefit from share price changes for, or increase or decrease the voting power of, such proposer,
lay out any material interest of the proposer in Tesla’s business, and
include a statement on whether the proposer will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal
Don’t get confused by the noise, amplified by the Mainstream Media.
Be prepared, think about consequences, and realize that in the end it’s a vote that will decide, not Twitter or MSM noise.
So, as of today, I highly encourage you to ensure you are a stockholder of record and in a position to participate in the votes.
Tesla has set up in July 2022 the Tesla Shareholder Platform, but many of us have been stuck in the “received” status, without further action nor confirmation. An update, as soon as possible, by Tesla’s IR department would be highly appreciated.
Tesla has also put in place a Shareholder Vote Guide page, where you can check whether your broker accepts and handles your shareholder vote.
How can you contact the Board of Directors?
You may prefer to voice your concerns or encouragement directly to the Board of Directors. You can provide comments or report concerns in these three manners:
By postal mail to:
Tesla, Inc.
1 Tesla Road
Austin, Texas 78725
Attention: Legal Department
By email to: legal@tesla.com or shareholdermail@tesla.com
By using the online contact form, switching the recipient to “Board of Directors”, on this page.
