Morgan Stanley analyst Adam Jonas sees $Tesla (TSLA.US)$'s upcoming shareholder vote driving material volatility in the stock and determining the company's long-term strategic direction as company CEO Elon Musk's pay package hangs in limbo.

Analyst Recommendation: For the upcoming shareholder meeting scheduled for June, Tesla shareholders will vote again on Musk's 2018 pay package which was rescinded by a Delaware court earlier this year after deeming it an "unfathomable sum." The package was worth $56 billion at the time of award.  

The outcome of the vote on the package will be key to determining if the CEO gets a 25% voting block within the company, Jonas said in a note on Friday. Musk has previously expressed discomfort with advancing Tesla in the field of AI without having 25% voting. While the approval of the pay package by itself does not assure the CEO of his desired voting block, it would make it "increasingly difficult" for Musk to achieve 25% ownership if the package is rejected, the analyst noted.

Tesla's AI potential will remain limited and its share price dominated by larger EV market developments until Musk's voting control issue is resolved, Jonas said. "This is extremely problematic for Tesla investors for a number of reasons, including the inability to quantify the impact," he said.

The attention being paid to the performance of the stock since the start of the year, however, is 'surprisingly little,' the analyst noted.

Why It Matters: Tesla's annual meeting will be held on June 13, 2024, at 3:30 p.m. Central Time (CT). Shareholders will vote both on moving Tesla's state of incorporation from Delaware to Texas and Musk's rescinded pay package.

Price Action: Tesla shares closed down 2% on Friday at $168.47. The stock is down 32.2% year-to-date, as per data from Benzinga Pro.