A Delaware judge recently voided a compensation plan for Telsa Inc (NASDAQ:TSLA) CEO Elon Musk from 2018, which was previously approved by the company’s board of directors and shareholders.
The decision has prompted Musk and Tesla to consider changing their incorporation from Delaware to Texas, the state the company is currently headquartered in.
What Happened: Musk recently said that Tesla’s board of directors will vote on whether to re-incorporate Tesla in the state of Texas following the judge’s decision, which comes after a Twitter poll asked users how they felt.
Leading Tesla analyst Daniel Ives recently provided an update on the latest Tesla compensation plan.
“As the saying goes…’They started it, we will finish it,’ this will now be the mantra for Musk and the Board around moving Tesla from being incorporated in Delaware to Texas at its upcoming shareholder meeting,” Ives said.
The analyst, who has an Outperform rating on Tesla and price target of $315, called the judge’s decision a “head scratcher ruling.”
Ives said that Tesla’s board of directors has yet to make an official response to the judge’s ruling, but notes Musk’s poll and comments that it will be voted on.
“As such, Tesla will hold a shareholder vote at its upcoming meeting this May in which we expect Tesla to shift out of Delaware.”
Ives said the judge’s ruling came after many expected the lawsuit to be thrown out.
Related Link: What Lies Ahead For Tesla Now That Delaware Court Has Dismissed Elon Musk’s $56B Pay Package?
Why It’s Important: Ives recently said the ruling from the judge “creates a tornado situation for Tesla’s Board.”
The analyst said the Street is watching how Tesla’s board reacts and the next move they make. Tesla can appeal the decision, or create a new compensation plan that would take the place of the 2018 original plan.
Ives said Tesla could also create a new compensation plan that meets the ruling of the judge and also gets Musk’s stake in Tesla to the 25% threshold he recently requested.
“We believe Tesla moving to Texas would clear the way for the Board to likely go down the path to get Musk towards the 25% voting rights,” the analyst said.
Ives previously shared 10 ideas that could help Tesla stock after the fourth-quarter earnings report. One of the points was creating a new compensation plan…
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