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Tesla’s bid to revive Musk’s record pay

Tesla’s bid to revive Musk’s record pay

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Tesla's bid to revive Musk's record pay

Tesla shareholders will vote on June 13 to ratify Elon Musk’s $56 billion pay package, which a Delaware judge voided in January because she found he improperly controlled the process. They will also be asked to approve moving the company’s legal home to Texas from Delaware.

Below is a look at the potential legal fight standing in the way of Musk’s payday.

WHAT IMPACT WILL THE SHAREHOLDER VOTE HAVE?

If shareholders reject the move to Texas and Musk’s pay, it will vindicate the court’s ruling that described Musk’s pay as “unfathomable,” and would be a stinging defeat for a board that critics say is dominated by Musk.

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If shareholders vote to pay Musk, it will likely set off another legal challenge. Where that challenge takes place might depend on the vote to move Tesla’s legal home to Texas.

IF TESLA BECOMES A TEXAS CORPORATION

Lawyers for Richard Tornetta, the shareholder who sued in Delaware in 2018 over Musk’s pay, have said in court filings they fear the shareholder vote is a bid to use a Texas court to undo the January ruling.

For her part, the judge in Delaware, Chancellor Kathaleen McCormick, said on May 28 that she was assured by Tesla’s attorneys the company would not litigate any dispute over the shareholder vote outside Delaware.

IF TESLA REMAINS A DELAWARE CORPORATION

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The judge in Delaware still has to decide how much to award to Tornetta’s legal team as a fee payable by Tesla before Musk and Tesla can appeal. The shareholder legal team requested $6 billion. A hearing is scheduled for July 8.

Tesla’s legal team has said a vote ratifying Musk’s pay would materially affect the Delaware proceedings, although they did not explain how. If the pay package is ratified at the shareholder meeting, it will almost certainly be challenged by shareholders opposed to it.

McCormick could include such a challenge in the ongoing Musk pay case or create a new lawsuit. If it were a new case, that would allow Tesla and Musk to appeal the January ruling to the Delaware Supreme Court while the Court of Chancery sorted out challenges to the shareholder vote, which could take months or even years.

TESLA’S NOVEL USE OF A RATIFICATION VOTE

Tesla’s ratification vote is based on Delaware law that is meant to allow companies to clean up technical defects in corporate transactions, like sales of stock that were not properly authorized. The company described its approach as “novel” in its proxy filing.

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No one has filed a legal challenge, but Charles Elson, a former University of Delaware professor who specialized in corporate governance, said in a court filing that ratification cannot be used as Tesla is applying it – to correct a breach of fiduciary duty by a board.

CHALLENGE TO THE VOTE

Tesla shareholders could also challenge the vote, citing Musk’s efforts to sway voting. Musk on May 18 responded “yes” to a post on X that said if Musk gets the 25% equity stake he has demanded along with incorporating the company in Texas and his 2018 pay package reinstated, then AI and robotics stay with Tesla.

The company filed Musk’s response with the Securities and Exchange Commission as proxy material.

Musk’s veiled threat to take AI from Tesla if he does not get his pay may be a potential violation of corporate law, which prohibits directors and officers from taking business opportunities for themselves that belong to the company. 

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Alphabet to report double-digit Q2 growth

Alphabet to report double-digit Q2 growth

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Alphabet to report double-digit Q2 growth

 Google-parent Alphabet is expected to report a nearly 14% rise in quarterly revenue, its fourth straight quarter of double-digit growth, driven by steady demand for its artificial intelligence-powered cloud computing services and an uptick in the ad market.

The search giant’s second-quarter report on Tuesday, the first among the Big Technology companies this season, could offer further insight into the uptake of AI services, as well as the rising costs associated with the new technology.

At a developer conference in May, Google widely rolled out AI-powered summaries in Search and beefed up its Gemini AI model to better compete with services from OpenAI and

Google is also launching new Pixel devices with AI capabilities next month, moving forward its unveiling event, typically set in the fall, after Apple announced in June a slew of AI capabilities and an integration with ChatGPT in the latest iPhones.

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“Investors will be looking for continued success in Search, but also for signs of the company adapting to the new world of AI,” said Gil Luria, senior software analyst at D.A. Davidson & Co.

“The company will need to show that AI is driving Google Cloud growth, that there are no share losses in Search as users start leaning more on AI chat, and that the new models being built are competitive.”

Alphabet’s AI investments will also be closely watched. In the January-March period, the company’s capital expenditure jumped 91% to $12 billion, rattling some investors even though CEO Sundar Pichai assured that the AI integrations were boosting demand for its cloud and search businesses.

Nvidia is working on a new version of its flagship AI chips that is meant to avoid U.S. restrictions on sales to China.

The company’s operating expenses in the second quarter ended June likely rose more than 32% to $27.57 billion, according to LSEG data, the highest jump in over two years.

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Investors will also have questions around reports that Alphabet is in talks to buy cybersecurity startup Wiz for roughly $23 billion and how that would affect its bottomline.

Alphabet’s core businesses are likely to report healthy growth as an improving macro-economic climate gives customers the confidence to invest in cloud computing and spend on advertising.

“Google search spending still held up fairly well … we think advertisers need to spend as a key offset to inflation,” said RBC Capital Markets analyst Brad Erickson.

Media investment firm GroupM raised its 2024 global advertising growth forecast to 7.8% in June, from 5.3% in December, primarily on account of better-than-expected spending in China and the United States.

Analysts also expect strong performance at YouTube, thanks in part to expanded monetization features in its TikTok-styled video offering, Shorts.

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Alphabet’s second-quarter cloud computing sales and advertising revenue are expected to grow 26.4% and 10.8%, respectively, according to LSEG data, largely similar to the preceding two quarters.

Ad-dependent peer Meta Platforms will report its results next week on Wednesday, July 31. 

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Delta cancels another 600 flights on Monday in wake of cyber outage

Delta cancels another 600 flights on Monday in wake of cyber outage

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Delta cancels another 600 flights on Monday in wake of cyber outage

Delta Air Lines canceled more than 600 flights on Monday, as the U.S. air carrier continued to struggle to restore operations after last week’s global cyber outage, even as other airlines were recovering from the incident.

About 16% of Delta’s flights had been canceled as of 7:00 a.m. EST, according to data from FlightAware, out of roughly 1,100 flights to or from the United States overall, the website said.

The issue has stranded thousands of Delta travelers across the United States, with some having to rent cars to drive hundreds of miles while others could have to wait days for new flights or cancel trips altogether.

The Atlanta-based airline is battling operational issues after the outage hit its crew tracking system. Delta’s total number of canceled flights since Friday has exceeded 5,000.

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A Delta spokesperson did not immediately respond to an emailed request for comment.

A software update by global cybersecurity firm CrowdStrike triggered system problems for Microsoft customers, including many airlines, on Friday.

Although other U.S. airlines have largely recovered, Delta has struggled to return to normal. American Airlines had called off 1% of its flights on Monday, while United Airlines canceled less than 1%.

Delta shares were little changed in premarket trading on Monday.

Nvidia is working on a new version of its flagship AI chips that is meant to avoid U.S. restrictions on sales to China.

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Delta CEO Ed Bastian said over the weekend that the CrowdStrike issue affected its Microsoft Windows systems, snarling a critical application.

“One of our crew tracking-related tools was affected and unable to effectively process the unprecedented number of changes triggered by the system shutdown,” Bastian told customers in an email.

In a separate note, he told employees that Delta would continue to “tactically adjust” schedules to ensure safety.

Transportation Secretary Pete Buttigieg spoke with Bastian over the weekend, according to an official, reminding him of the carrier’s responsibilities to customers and the department’s enforcement role.

CrowdStrike said a significant number of the 8.5 million affected Microsoft devices were back online. 

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CrowdStrike shares set to extend losses as outage effects linger

CrowdStrike shares set to extend losses as outage effects linger

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Shares of CrowdStrike fell 5% in premarket trading on Monday, extending their streak of losses, after several analysts downgraded the stock on concerns over the financial fallout from the global cyber outage last week.

CrowdStrike’s glitchy update to its security software affected computers powered by Microsoft’s Windows operating system, disrupting internet services across the globe and leaving people without access to banking or healthcare services.

Microsoft said on Saturday that about 8.5 million Windows devices, or less than 1% of all Windows machines, were affected.

Services across industries gradually came back online later on Friday but companies were dealing with backlogs, delays, canceled flights and other issues, raising questions on how to avoid such a situation in the future and whether such critical software should remain in the hands of a few companies.

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CrowdStrike will likely face resistance in signing new deals in the near term as a result of the anticipated fallout from the quality assurance issue which caused the massive tech outage, Guggenheim analysts said on Sunday.

“While the outage could remain a near-term overhang, we believe CrowdStrike will emerge as a stronger company as this was not a breach, but rather a significant breakdown in process,” RBC Capital Markets analysts said.

At least six brokerages have cut their price targets on CrowdStrike, with two more downgrading the stock’s rating to “neutral” from “buy”.

The outage triggered an 11% drop in CrowdStrike’s shares on Friday.

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