Three Things (12/4)

Delaware denies Musk (again)

Shareholder saga … Elon Musk’s $56 billion compensation package at Tesla was struck down again by a Delaware court, despite strong shareholder support in a June vote. Chancellor Kathaleen McCormick upheld her earlier ruling, citing that Tesla’s board failed to act independently of Musk when approving the 2018 package.

Interestingly, the original case was brought by a retail shareholder owning just nine shares.

Tesla Owners of Silicon Valley questioned the ruling on X, asserting it undermines employee and shareholder efforts. Musk, meanwhile, dismissed the court as corrupt and advised against incorporating businesses in Delaware. Tesla and SpaceX have since shifted their registrations to Texas.

Chart via Reuters, market cap ranking as of Apr-24

Delaware is a popular state for corporate incorporation due to its business-friendly laws, efficient courts, and tax advantages. However, the court’s focus on corporate governance underscores its commitment to preventing conflicts of interest in executive pay. 

Executive pay packages like Musk’s can significantly impact shareholders. While they may align executives’ goals with company success, oversized packages risk diluting shareholder value and raising corporate governance concerns. Tesla plans to appeal, but any new compensation framework will need to work under Texas law.

Export ban targets tech

Critical commodities … China has announced export restrictions on key rare minerals—gallium and germanium—effective immediately. Both materials are vital for high-tech industries, including semiconductors, telecommunications, and defense systems. 

The Chinese Ministry of Commerce framed the decision as a measure to safeguard “national security and interests.” However, analysts view the move as a calculated step in the ongoing geopolitical competition, particularly with the United States and its allies. 

Gallium and germanium are essential for producing advanced chips and fiber-optic systems. The restrictions could create supply shortages and increase costs for manufacturers in Europe, the U.S., and Japan. “China’s dominance in processing and exporting these materials gives it significant leverage,” wrote Scott Kennedy, senior adviser at the Center for Strategic & International Studies. 

Image via The Oregon Group

Beijing’s decision comes amid mounting tensions over technology and trade. Some interpret it as retaliation for U.S.-led efforts to limit China’s access to advanced chip technologies. On X, a Chinese government account highlighted the hypocrisy of “tech embargoes” while criticizing “Western double standards” in trade. 

For global businesses, the impact could be swift and severe. Firms will likely need to secure alternative suppliers, but diversifying away from China’s near-monopoly in processing rare minerals won’t happen overnight. Kennedy summed it up: “This is a warning shot from Beijing. They’re signaling the price of exclusion from advanced technologies will be high.” 

Star-powered stock-picking

Good fun … The Robin Hood Foundation, known for tackling poverty in New York City (not the trading app), is hosting a celebrity stock-picking contest including some of the biggest names in finance. Bloomberg is providing regular leaderboard updates, with Bill Ackman holding a commanding lead just over a month into the competition. 

Contestants each donated $10,000 to enter the six-month contest, picking one stock to go long on and one sector to short. You can see all of the participants and their picks here.

Image via Bloomberg

So far, the contest has raised over $400,000, with two-thirds of the prize money set to benefit the charity chosen by the eventual winner. The competition wraps up on April 30, with the winner determined by the highest total return at market close.

One more thing: Enron, the infamous energy giant that collapsed into bankruptcy 23 years ago, has mysteriously resurfaced with a website, merch store, and rumors of a cryptocurrency venture. Approximately $2 billion in retirement savings vanished for Enron employees and retirees after its controversial collapse in 2001.

Disclosures:

As of writing, AAPL, GOOGL, MSFT, META, NVDA, and AMZN are holdings in Titan's Flagship strategy. V is a holding in Titan's Offshore strategy.

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