Bernstein Just Issued a Warning on Tesla (TSLA) Stock

view original post

InvestorPlace – Stock Market News, Stock Advice & Trading Tips

Tesla (NASDAQ:TSLA) is among the mega-cap tech stocks that have seen the most downside this year. Shares of TSLA stock are down more than 30% on a year-to-date basis today. They’re moving lower today on the news surrounding the upcoming shareholder vote on CEO Elon Musk’s compensation.

Investors, including the Norwegian sovereign wealth fund and CalSTRS, a massive California pension fund, have indicated they will not vote to approve the proposed $56 billion pay package. On this news, investors are growing increasingly pessimistic about the company’s outlook in the event Elon Musk shifts more of his time away from the U.S.-based EV maker.

Analysts are also growing wary of what this shareholder vote will portend for the stock. Bernstein is among the firms that believes the proposal may not pass, and is cautioning investors that this could be very bad news for TSLA stock.

Let’s dive into what to expect from this upcoming vote and what it may mean for Tesla investors.

TSLA Stock Lower Ahead of Key Shareholder Vote

There are many reasons why a large investor may choose to vote in favor or against this proposal. To a certain extent, this pay package can be objectively viewed as excessive, considering it blows any previous such CEO pay package out of the water. On the other hand, what Elon Musk has accomplished in recent years is truly incredible and has generated enormous wealth for shareholders who have stuck with the company.

The fact that this retroactive pay package has been struck down by the legal system, and a number of legal experts have suggested that even if this package is approved, it could be struck down by the courts again, provides a reason for analysts to remain cautious on the likelihood of Elon Musk receiving the amount of compensation he believes he should be entitled to.

This will be a precedent-setting case and one that may redefine how CEO compensation packages are structured in the future. However, considering some rather large investors are already indicating a lack of willingness to support the package, I’d have to side with Bernstein analysts on this call.

Tesla Investors on Edge

Now, it’s unclear whether Tesla’s large retail investor base will have enough sway to swing the vote in its favor. There is always the possibility that shareholders will vote in favor of the package, and the revised disclosures will be enough to see the Delaware court approve the package. But as of right now, it does appear Tesla investors should have heightened concern about this package passing and the potential downside effects this decision will have on TSLA stock moving forward.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

More From InvestorPlace

The post Bernstein Just Issued a Warning on Tesla (TSLA) Stock appeared first on InvestorPlace.