Elon Musk's $56 billion pay package will likely see overwhelming approval, putting a big overhang for the stock behind it, Wedbush Securities' Dan Ives says

• Elon Musk's $56 billion pay package is probably getting approved by shareholders, Wedbush said.

• The issue has been an "overhang" on Tesla's stock price, Wedbush's Dan Ives said.

• Wedbush reiterated its "outperform" rating and $275 price target on Tesla stock.

Elon Musk's controversial $56 billion pay package will mostly likely get the green light from investors, Wedbush Securities' Dan Ives said, and it'll eliminate what's been a big "overhang" for the stock in 2024.

The tech analyst pointed to Tesla's upcoming shareholder vote on Musk's staggering compensation package. The vote comes after the pay deal was struck down by a Delaware judge earlier this year.

Shareholders will most likely reapprove the package, Ives said, given that they approved it in 2018.

"We would expect the 2018 package will be overwhelmingly reapproved, and the Delaware court ruling would be moot in essence as Tesla will now be moving to incorporate in Texas," Ives said in a note on Thursday. "This issue has been an overhang on Tesla's stock and this will be important to move this distraction in the rearview mirror."

Tesla stock is down 28% this year, partly due to anemic demand for its vehicles and the drama surrounding Musk's compensation. Shortly after the Delaware ruling, Musk made moves to shift Tesla's state of incorporation from Delaware to Texas, and has floated moving AI projects away from Tesla unless he is given 25% ownership of the company.

Still, Wedbush analysts reiterated their "outperform" rating on the stock and their $275 price target, adding that there could be another 55% upside to shares.

That outlook assumes Musk could "recommit" to Tesla over the next three to five years as its CEO, Ives said, referring to criticism that Musk has neglected Tesla in favor of his other companies and projects.

Musk's leadership will be particularly important as Tesla makes headway on some of its biggest initiatives, such as its plans to release a low-cost vehicle and develop its full self-driving technology, Ives added.

"Clearly Tesla is going through a challenging period of delivery growth and this story will not turnaround overnight so patience is required. However, it now feels that Musk is taking tighter control of the reigns of Tesla," Ives said.

"Execution of the lower cost vehicle and driving incremental demand in the key China market must be flawless," he added. "Otherwise this could derail the bull thesis in the next 6 to 12 months as the pressure builds on Musk to navigate Tesla through this dark demand storm with next week removing one overhang."

Some of Tesla's largest investors have spoken out against Musk's proposed pay package. The California Public Employees' Retirement System, which is among Tesla's top 30 shareholders, said it didn't believe the package was "commensurate with the performance of the company."

Tesla, meanwhile, seems to be trying to secure votes ahead of its annual meeting. The company has offered investors a chance to tour its Texas Gigafactory if they vote in favor of Musk's pay package.

Tesla did not immediately respond to a request for comment from Business Insider.

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