Tesla, Inc. (NASDAQ:TSLA) Attorneys for Tesla Inc. asked a Delaware judge to dismiss shareholders’ complaints
Attorneys for Tesla Inc. asked a Delaware judge Thursday to dismiss shareholders’ complaints over a compensation plan that could net CEO Elon Musk more than $50 billion over the next decade.
A shareholder lawsuit filed last June alleges that Musk and Tesla’s board of directors breached their fiduciary duties to the company and its stockholders, granting unjust enrichment to Musk and wasting corporate assets.
The lawsuit said the pay plan is not just excessive but unnecessary, and that it should be subject to court review because it was negotiated by a compensation committee and approved by a board whose members had conflicts because of personal and professional ties to Musk.
“Those numbers were negotiated by conflicted people,” shareholder attorney David Tejtel argued Thursday, referring to the staggering sums involved in Musk’s compensation package.
Under the plan, Musk could reap billions if the electric car and solar panel maker hits ambitious market capitalization and operational milestones. For each of 12 milestones the company achieves, Musk, who already owns more than 20% of Tesla, would get stock equal to 1% of outstanding shares at the time of the grant.
Each milestone includes growing Tesla’s market capitalization by $50 billion and meeting aggressive revenue and pretax profit growth targets.
“He’s nowhere near getting paid a nickel as we speak,” noted Vice Chancellor Joseph Slights III.
Musk would receive the full benefit of the pay plan, $55.8 billion, only if he leads Tesla to a market capitalization of $650 billion and unprecedented revenues and earnings within a decade.
“If he doesn’t generate outsized returns … he gets nothing,” Tesla attorney William Savitt said of the all-or-nothing package. “It creates massively ambitious targets.”
After 15 years in business, Tesla has yet to turn a full-year net profit. Last month, the company reported a first-quarter loss of $702 million, more than double what analysts had expected and ranking among the company’s worst quarters in the past two years.
Savitt argued that the lawsuit fails to adequately allege that Musk’s new compensation package constitutes waste or is unfair to stockholders, who themselves would see significant benefits of their investment if the milestones are reached.
Just because the pay proposal is unusual and on a grand scale doesn’t make it unfair, said Savitt, who noted that at a special shareholder meeting last year it received the support of more than 70% of shares of common stock not owned by Musk or his brother, Kimbal Musk.
Tejtel, the plaintiff’s attorney, noted that the proposal did not earn the support of the majority of all of Tesla’s outstanding disinterested shares, but only a majority of shares represented at the meeting, either in person or by proxy. The failure to gain a majority of all outstanding shares means the deal is subject to court review, he argued.
Under Delaware’s “business judgment” rule, deference is typically given to a corporate board’s decision-making unless there is evidence that directors had conflicts or acted in bad faith.
If a plaintiff is able to overcome the business judgment rule’s presumption, the board’s action is then subject to an “entire fairness” analysis,” which shifts the burden to the corporation to show that the deal involved both fair dealing and fair price.
“It seems that what we’re talking about here is scale,” said Slights, who told attorneys he would try to issue a decision promptly.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 280.44.
The projected upper bound is: 264.19.
The projected lower bound is: 216.86.
The projected closing price is: 240.52.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.
A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.
A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 7 falling windows in the last 50 candles–this makes the current falling window even more bearish. The two candles preceding the falling window were black, which makes this pattern even more bearish.
A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 40.2352. This is not an overbought or oversold reading. The last signal was a sell 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.43. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 8 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -62. This is not a topping or bottoming area. The last signal was a buy 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 3 period(s) ago.
Rex Takasugi – TD Profile
TESLA INC closed down -2.860 at 241.980. Volume was 28% below average (neutral) and Bollinger Bands were 6% narrower than normal.
Open High Low Close Volume___
242.000 243.680 236.943 241.980 6,711,382
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 243.77 269.50 304.73
Volatility: 57 55 74
Volume: 13,496,345 10,829,918 9,566,813
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
TESLA INC gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
TESLA INC is currently 20.6% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of TSLA.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on TSLA.O and have had this outlook for the last 19 periods.