ISS advised Tesla investors to vote against board chair Robyn Denholm’s re-election on Wednesday, citing worries about a lack of examination of CEO Elon Musk and his brother Kimbal Musk’s stock pledges.
Given Musk and his brother’s pledged shares’ worth and the possibility of further rises, ISS warned Tesla investors against pledging or using them as collateral for loans.
“Pledging does inherently pose risks to ordinary shareholders, and the likelihood of a forced sale of pledged shares increases at a time when the share price (and therefore the value of the collateral) is already declining,” ISS noted.
Tesla shares have fallen 60% since November 2021.
ISS stated Elon Musk pledged 58% of his Tesla stake.
Musk didn’t reply to Reuters’ request for comment. Instead, he tweeted in January that advice firms like ISS and Glass Lewis had “far too much power.”
Tesla’s maximum borrowing is $3.5 billion, 25% of the pledged stock’s value.
Musk and co-founder JB Straubel were ISS board nominees.
Last month, Glass Lewis advised Tesla shareholders to vote against Straubel due to concerns about his independence as Tesla’s CTO until 2019.
Tesla’s annual shareholder meeting is May 16.
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