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.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
