When Tesla, the darling of electric vehicles, made its debut on Wall Street over a decade ago, skepticism loomed large. The landscape was rife with challenges as the memory of the 2008 financial crisis still lingered, and the market had little faith in new automakers.

Against this backdrop, Tesla, under the leadership of the enigmatic Elon Musk, defied the odds. Transitioning from a luxury electric vehicle manufacturer to a profitable, market-defining enterprise, Tesla not only survived but thrived. Its stock outperformed the S&P 500, leaving legacy automakers like Ford and General Motors playing catch up.

Image Source: Zacks Investment Research

However, as Wall Street shifts its focus to short-term gains, Tesla’s recent underperformance compared to traditional automakers has raised concerns. The impending shareholder vote on June 13 will determine the fate of a substantial pay package for Musk, which was recently nullified by a court ruling in Delaware, where Tesla is incorporated.

The shareholders now hold the reins to Musk’s compensation, a decision that could shape Tesla’s trajectory in the months to come.

The Pay Package Predicament

Drawing parallels to the unpredictability of the 2016 U.S. Presidential Election, predicting how shareholders will vote remains uncertain. The past, however, offers insights that may guide investors’ expectations.

Several factors indicate a potential approval of Musk’s pay, such as Tesla’s astounding market cap growth since its inception, reaffirming investor confidence in the company’s long-term vision.

Additionally, a bet on Tesla is intrinsically a bet on Musk, who has navigated the company through tumultuous times with remarkable resilience. History has shown that dismissing visionary leaders like Musk often leads to regrettable outcomes.

Moreover, the evolution of innovation takes time, and skeptics are not uncommon. Shareholders with a robust belief in Musk have historically supported his compensation plans by significant margins, signifying their trust in his leadership.

Billionaire investor Ron Baron’s backing of the pay package further strengthens the case for approval, given his substantial stake in Tesla and influential position within the investment community.

The Market’s Response

Following the shareholder vote, Tesla’s stock performance is likely to witness a binary outcome. The approval or rejection of Musk’s compensation plan will undoubtedly have a profound impact on how investors perceive the company’s future.