Investor Ross Gerber of Gerber Kawasaki Wealth and Investment Management has publicly criticized Tesla Inc. (NASDAQ: TSLA) for prioritizing digital advertising aimed at promoting CEO Elon Musk’s controversial $900 billion compensation plan while the company struggles with declining car sales. Gerber expressed his astonishment in a post on X, emphasizing that it is surprising for an automotive company facing sales challenges to spend resources on marketing a pay package instead of addressing its core business.
The criticism comes as Tesla has initiated advertising campaigns that reportedly underscore Musk’s contributions to the company, just ahead of its annual shareholders meeting scheduled for March 15, 2024. During this meeting, shareholders will vote on the proposed compensation plan, which has drawn mixed responses from investors and analysts alike.
Sales Concerns Amidst Political Controversies
Tesla’s recent sales figures have raised alarms, particularly in key markets such as Europe and China. Reports indicate that Musk’s political activism, including a substantial $250 million donation to former President Donald Trump‘s campaign, may have negatively impacted sales, costing the company nearly 1 million car sales in the U.S. alone. Such challenges have intensified scrutiny of Tesla’s direction and priorities as it navigates a competitive automotive landscape.
Investor sentiment regarding Musk’s pay package remains divided. On one side, Cathie Wood of Ark Invest has voiced her support for the plan, describing Musk as “the most productive human being on earth.” She believes the compensation structure is beneficial for all stakeholders. Michael Dell, founder of Dell Technologies Inc., echoed this sentiment, pointing out that Musk’s stock awards are directly tied to ambitious market capitalization and operational metrics. He stated, “If he falls short, he gets nothing. If he succeeds, shareholders will win big through unprecedented value creation.”
Opposition from Key Investors
Conversely, Norges Bank Investment Management, Norway’s sovereign wealth fund with a 1.12% stake in Tesla, has publicly announced its opposition to Musk’s pay package. The fund expressed concerns regarding the total size of the award, potential dilution, and the absence of measures to mitigate key person risk. In a statement, the fund acknowledged the significant value Musk has created but highlighted their apprehensions about the scale of his compensation.
Gerber, who was previously a strong supporter of Tesla, has labeled the proposed pay package as “absurd.” He criticized the company’s board for what he perceives as prioritizing Musk’s interests over those of the company and its shareholders.
Market Reaction and Future Outlook
Despite the controversies surrounding Musk’s compensation plan, Tesla’s stock demonstrated resilience. Shares increased by 4.01% on Wednesday, closing at $462.07, and saw a slight uptick of 0.11% overnight. The stock has received favorable ratings in terms of momentum and quality, indicating positive short- to long-term trends according to Benzinga’s Edge Stock Rankings.
As the annual shareholders meeting approaches, the outcome of the vote on Musk’s compensation plan will be closely watched by investors and analysts. The discussions surrounding this issue reflect broader concerns about Tesla’s operational strategies and the interplay between corporate governance and executive compensation in the electric vehicle market.
