Pivotal retail investors in Tesla are at risk of losing a vote at the AGM

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Tens of thousands of Tesla’s international retail shareholders who own about $17 billion in stock may not be able to vote at its annual meeting because investment platforms have failed to put in place proper cross-border systems.

The world’s largest electric car maker has campaigned to urge investors to support two resolutions that are likely to be close votes at its June 13 meeting: one to re-certify CEO Elon Musk’s $56 billion salary and another to re-establish the company in Texas. .

The latest move came after a Delaware judge decided to cancel Musk’s stock options package, the most profitable in the history of American companies, due to concerns about the independence of the board of directors.

Tesla has an unusually high percentage of individual shareholders — who own about 30 percent of the company — and the significant hurdles to success for both votes, particularly the move to Texas, would require many of them to vote in favor. President Robyn Denholm likened her mission to win the shareholder vote to climbing Mount Everest.

But many investors in Europe and Asia have found they are unable to cast ballots electronically from outside the United States because the stockbrokers and online trading platforms where they maintain their stock accounts do not have adequate systems.

Tesla estimates that about 3 percent of its shares could be affected, according to people familiar with the situation. This equates to $16.7 billion of Tesla’s $558 billion valuation.

A vote to reincorporate Tesla in Texas has a higher threshold, requiring a majority of all outstanding shares to vote in favor, meaning votes not cast are considered against the proposal.

“Given the size of retail ownership, every individual vote counts,” one person said.

Tesla is working with Innisfree, which has more than 100 employees on the campaign. Their tactics include contacting individual investors, sending out brochures — nicknamed “fight letters” — encouraging people to vote, and a social media awareness campaign on Musk’s X platform.

Tesla and Innisfree have been trying to convince brokers to put in new processes, but while a few have been helpful, most have not, saying they haven’t had time to install the infrastructure, the sources said.

Hargreaves Lansdowne, the UK’s largest private investment platform with $120 billion in assets and 1.7 million clients, is one of the international stockbrokers through which Tesla shareholders were unable to vote.

“Last year we introduced AGM voting for UK and European companies, and expanding this service to other jurisdictions abroad is something we are working on,” the company said. In Tesla’s case, “We worked with our dealer service provider to try to facilitate this one-time event. However, that was not possible.”

HL holds most of its clients’ U.S. securities, including Tesla shares, as a Crest Depositary Interest, or CDI, which has historically not allowed voting in the EU or the US. This year, Crest entered into a partnership with the American fintech Broadridge To provide such a service, but it has not yet been expanded to include all US securities. Despite fierce pressure from Tesla, it was unable to install it in time to get the automaker’s votes.

BNP Paribas’s Consortium Bank, whose clients also represent a large number of stocks, is another big player that does not offer proxy voting services for U.S. stocks, according to people familiar with the situation. Consorsbank was not available for comment.

There are other obstacles that may make individual investors less inclined to vote. For example, Degero, an Amsterdam-based online stock broker, charges a fee of €10 per shareholder who wants to vote, to cover manual management expenses; The Swiss company Swissquote asks customers to call its service line.

Others have made exceptions in response to a Tesla-backed public relations campaign. Swedish Bank Online Avanzawhich does not typically offer voting services in non-domestic markets, sent an email to customers informing them that it would allow this once.

The stakes are high, and it’s even more dependent on individual shareholder votes after big dealer advisors Glass Lewis and ISS both urged Tesla owners to vote against Musk’s pay decision. Their opinion influences the decisions of large institutional investors. However, Tesla has received “cautious” support from the ISS for its reincorporation in Texas.

Vanguard, Capital Group, Norwegian Oil Fund and State Street are among Tesla’s 10 largest shareholders who voted against the wage proposal in 2018, which was nonetheless approved with 73 percent approval. Leading Scottish mortgage investor Baillie Gifford, one of the carmaker’s oldest shareholders and holding the 15th largest stake, said it plans to back Musk’s $56 billion prize.

However, the CEO of Calpers — the largest public pension fund in the U.S. and one of the top 25 shareholders with a $1.67 billion stake — said in an interview with CNBC on Wednesday that he intends to vote against the deal, stating that he “can’t believe the compensation “. It is commensurate with the company’s performance.

musk books In response to X: “Calpers broke the deal. Shame on them, they have no honor.”

Tesla declined to comment.

Additional reporting from Sarah White in Paris