Prof G Markets: Paramount’s Suitors, Nepo Babies on the LVMH Board, and Elon’s Voided Pay Plan
Feb 5, 2024
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Ed Elson, a seasoned ProfG Media Analyst, joins the discussion on some intriguing market trends. They dive into Byron Allen’s ambitious $14.3 billion offer for Paramount and other potential buyers. The conversation then shifts to LVMH's recent underperformance and issues of meritocracy versus nepotism within elite companies. They also unpack the fallout from Elon Musk's controversial compensation package and its governance implications, shedding light on corporate strategies that could reshape the landscape.
The court ruling on Elon Musk's compensation package highlights the importance of independent board members in ensuring fair and responsible compensation practices.
The conglomerate nature of LVMH and concerns about China's impact on luxury goods have affected its valuation relative to pure-play luxury counterparts.
Deep dives
Elon Musk faces shareholder lawsuit over compensation package
Elon Musk is facing a shareholder lawsuit alleging that his 2018 compensation package breached Tesla's fiduciary obligations to shareholders. The court found that the board failed to engage in meaningful negotiation over the package's terms and that five of the six directors who voted on the package had compromising conflicts or were beholden to Musk. The court ruled that the package, potentially worth $56 billion, was not necessary to incentivize Musk as he already owned 22% of Tesla at the time. This ruling highlights the importance of independent, fiduciary board members in ensuring fair and responsible compensation practices.
LVMH beats earnings expectations, triggers record high in luxury stocks
LVMH, the world's largest luxury goods company, reported sales up 13% over 2022, beating annual earnings expectations. The news restored chairman Bernard Arnault as the world's richest person and triggered a rally in other luxury stocks. However, LVMH's run-up was slower compared to the S&P 500 last year, leading to concerns from investors. The conglomerate nature of LVMH and the market's worries about China's impact on luxury goods have put pressure on the stock. Investors generally prefer pure-play companies, and this has affected the valuation of LVMH relative to its pure-play luxury counterparts.
Tesla's board breached fiduciary obligations in compensation package ruling
The Delaware Chancery Court ruled that Tesla's board breached fiduciary obligations in approving Elon Musk's 2018 compensation package. The court criticized the rushed and reckless process, the lack of meaningful negotiation, and the absence of benchmarking with other CEOs. The court also highlighted the conflicts of interest within the board, where several directors had close personal relationships with Musk. While Musk's compensation package, potentially worth $56 billion, achieved its goal of incentivizing him, the court questioned its necessity given Musk's existing ownership stake in Tesla. This ruling underscores the importance of robust governance and independent board members in ensuring fair and responsible compensation practices.
Earnings from Spotify, Snap, Alibaba, Disney, and Uber expected
Upcoming earnings reports from Spotify, Snap, Alibaba, Disney, and Uber are highly anticipated by investors. It will be interesting to see the financial performance and outlook of these companies, especially considering the dynamic market conditions and ongoing disruptions in various industries. Analysts and investors will closely examine the results for insights into each company's growth trajectory, market positioning, and ability to adapt to changing consumer behavior and industry trends. These reports could have a significant impact on the stock prices and investor sentiment in the respective sectors.
Scott shares his thoughts on Byron Allen’s $14.3 billion offer to buy Paramount, and identifies who would be a better acquirer. He also breaks down the latest earnings from luxury powerhouse LVMH, explains why its stock has underperformed, and discusses the problems with family businesses. Finally, he takes a look at the outcome of the shareholder lawsuit against Elon Musk.