Testimony began Monday in a Delaware courtroom where a Tesla shareholder is challenging a compensation plan for CEO Elon Musk potentially worth more than US$55 billion.
The lawsuit alleges that the performance-based stock option grant was negotiated by a compensation committee and approved in 2018 by Tesla board members who had conflicts of interest due to personal and professional ties to Musk.
The lawsuit, filed in 2018, also alleges that the shareholder vote to approve that compensation was based on an incomplete and misleading proxy statement. Specifically, the plaintiff alleges that proxy wrongly described members of the compensation committee as “independent,” and characterized all the milestones that triggered vesting in the stock options as “stretch” goals meant to be difficult to achieve, even though internal projections indicated that three operational milestones were likely to be achieved within 18 months of the stockholder vote.
“Any action by stockholders based on a materially misleading proxy is a nullity and the grant fails,” according to a brief by the plaintiff’s attorneys.
Attorneys for the defendants countered in their pretrial brief that two institutional proxy advisers noted that the plan would require “significant and perhaps historic achievements” and require growth that “appear stretching by any benchmark.”
The first witness to testify was Ira Ehrenpreis, a prominent venture capitalist and longtime friend of Musk who chaired Tesla’s compensation committee when the grant was formulated.
Under the plan, Musk stood to reap billions if the electric car and solar panel maker hit certain market capitalization and operational milestones. For each of incidence of simultaneously meeting a market cap milestone and an operational milestone, Musk, who already owned about 22% of Tesla when the plan was approved, would get stock equal to 1% of outstanding shares at the time of the grant. His interest in the company would grow to about 28% if the company’s market capitalization grew by $600 billion.
Each milestone in the plan includes expanding Tesla’s market capitalization by $50 billion and meeting an aggressive revenue or pretax profit growth target. Musk stood to receive the full benefit of the pay plan, $55.8 billion, only if Tesla hit a market capitalization of $650 billion and unprecedented revenues and earnings within a decade.
To date, Tesla has achieved all 12 of the market capitalization milestones and 11 of the operational milestones, resulting in the vesting of 11 of the grant’s 12 installments and providing Musk over $52.4B in stock option gains, according to the lawsuit. Since the grant was awarded, Tesla’s market capitalization has increased from $59 billion to more than $690 billion, having briefly hit $1 trillion early this year.
Shares of Tesla Inc. have been battered this year, like all automakers, due to a mix of backed-up supply chains and soaring inflation. Tesla shares have fallen 46% this year, while shares of Ford and GM have fallen around 31%.
However, the Austin, Texas, company earned $5.5 billion in 2021, blowing away the previous year’s profit of $721 million. It also produced a record 936,000 vehicles, nearly double what the company rolled off the assembly line in 2020.
Ehrenpreis testified that much of Tesla’s success has been the result of Musk’s leadership, which he said combined bold vision with “a maniacal focus on execution.”
“He has both a bold vision, but he has been as hard working a CEO as there can be,” Ehrenpreis said.
Under questioning from defence attorney Evan Chesler, Ehrenpreis described the nearly yearlong process under which he and other directors discussed and developed the compensation plan with the help of legal advisers and independent consultants, as well as input from major institutional investors.
Ehrenpreis described the milestones in the plans as “extraordinarily ambitious and difficult.”
According to minutes from a 2017 meeting of the compensation committee, the directors wanted to properly balance the motivation of “stretch” goals for Musk while avoiding “demotivating factors created by seemingly impractical, unrealistic or unachievable goals.”
Ehrenpreis also testified that his friendship with Musk played no role in his vote to approve the plan.
“I felt that it was very important to ensure Elon’s leadership in this next chapter of the company’s life,” he said, adding it was the kind of ambitious plan that drives Musk and would create one of the most valuable companies in the world.
Also testifying Monday was Todd Maron, Tesla’s former general counsel.
Maron testified that Musk never dictated terms of the plan, but that the process was cooperative and collaborative, “not a knock-down, drag-out affair.”
“There would be times when the board wanted something and Elon didn’t,” he said.
In his cross-examination of Maron, plaintiff attorney Jeroen van Kwawegen questioned whether the compensation plan was even needed to keep Musk as the helm, noting that there is no evidence he has ever thought about leaving Tesla.
“I intend to be actively involved with Tesla for the rest of my life,” Musk said in analyst call in May 2017, just weeks after work on the new compensation plan began.
Plaintiff’s attorneys pointed to an email to Maron in July 2017 in which Musk said he wanted to use proceeds from the new compensation plan to help finance his dream of colonizing Mars.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
