Elon Musk’s Pay Package… And A Media Meltdown 6/13/24

0:02Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. A rate route. Ten-year yields dropping to their lowest level in more than two months as the Nasdaq and S &P notch new record closes. Will stocks continue to catch a bid? And can the Dow catch up? And a media meltdown. Shares of Warner Brothers Discovery posting their lowest close since its spinoff from AT &T. And it's not the only name feeling the pain. What's behind this pullback? And can these stocks launch a turnaround? Plus, magical pharma shares trading near their highs of the year after analysts at Wolf research this week called its liver disease treatment the biggest biotech launch in 2024.

0:39We'll talk to CEO Bill Sibold about the launch and about competition from the GLP-1 heavyweights. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Bono and Eisen, and Guy Adami. And we start off with another set of records on Wall Street with the S &P and NASDAQ both closing at all-time highs. The move coming as yields move lower on another surprisingly cool inflation report. The benchmark 10-year dropping to its lowest level since early April after producer prices unexpectedly fell in May. That, combined with yesterday's soft CPI report, further raising hopes for Fed rate cut this year.

1:13We're going to get more on that in just a few minutes. But first, we do want to alert you that we have an alert on Tesla, votes on Elon Musk's$56 billion pay package just coming in. CNBC's Phil Lebeau has the latest. Phil. And we're waiting, Melissa. Right now we're in the stage of the meeting where they're going through each of the shareholder proposals. There are people who are talking about whether they're for or against the proposal. There was one investor who spoke up about why he does not believe that Elon Musk should be awarded the$56 billion pay package, which, by the way, is now worth 46, 47 billion dollars when you adjust it compared to what it was originally when it was awarded back in 2018.

1:59So after this, what will happen is they will say, well, the polls are open. The polls are closed. Those who are there can actually make their vote. Those who have not already voted. And then we expect to get the results, Melissa. So do we get it in 15, 20 minutes remains to be seen. But they are working their way through each of the proposals right now. All right, Phil, keep us posted. Phil LeBeau, we know that the board has already backed this pay package. Many large shareholders have backed it. It's the proxy advisory firms that are sort of throwing up some roadblocks here. What does this mean for a shareholder in Tesla?

2:33Well, I think if he gets it, it suggests that he's going to spend, his focus is going to be predominantly on Tesla, and that should be good for the stock. And I think that's why it rallied today. And we had a conversation, I think it was last week or a week and a half or so ago, where two analysts came out. We talked about this one at a$200 price target, another$125. And you said, who do you think is right? And we basically said they both could wind up being right. And as it turns out, I think that's what's going to happen. I mean, the stock traded up to$191 today. I think it was in the low$170s at the time.

3:00I still think it's a challenged company at best. And it's been upper left, lower right for quite some time. Along the way, you've seen bounces. And if he gets this pay package, that bounce, in my opinion, should probably be faded. I'm going to take the other side. I'm going to take the same side, but look at it from the other from a different perspective. I don't think Tesla really will have a I think they will really have an existential crisis if Musk were not to get this and to even threaten walking. I mean, clearly there's a prophetic like following behind him and his ties to Tesla. A lot of people are up in arms about him being involved in a lot of other companies, SpaceX, X, et cetera, et cetera.

3:38But ultimately, I really think this boils down to we should probably resist the urge to hindsight trade. This is a 2018 issue. We can argue about the challenges of the company going forward. But in terms of the KPIs and initiatives that were in place at the time, from my understanding, is that he hit, though. So I think we start to play a dangerous game when we allow five, six years to lapse. And then we look back looking to make changes retroactively. Right. That's true. But if you're a shareholder today and you are not a shareholder then and all you've seen are losses in your stock, how do you vote?

4:09Do you think, oh, he ethically deserves this pay because he earned it? Or do you think I'm unhappy because I'm losing money in the stock? I think you can think both. Yeah, I mean, you could think both. How would you ultimately vote? I would actually ultimately vote for because I do think those were, I think that if the issue with the Delaware court, which is it's that we don't opine on how much money he should get at all. We don't care. We care that the process was kosher. I think if the process had been kosher at the time, he would have gotten this pay package. And he did meet those numbers. So I think he should get it.

4:46We want him engaged. I don't own it. But if you did, you would want him absolutely engaged, right? But I hate the dynamic of him sort of, you know, holding a gun to shareholders' head of maybe I'll take AI and leave. If you don't, I don't love that dynamic. But one last thing. He is he does have skin in the game. Yes. Very as most as much skin as you can have in a game being this big of a shareholder, $46 billion equivalent shareholder. He could still take his A.I. and leave, though. I mean, if you think about his investments in, you know, X.A.I. and all these other things that now X is the nice prefix, it seems to go everywhere.

5:28Nothing would surprise me. This this campaign dynamic is something that's been interesting. Obviously, the market has, I think, voted in favor of Elon here. And historically, 80 percent of the retail consumer that own class, that own Tesla, are always voting in favor of Elon. Has he lost a little bit of that magic? I think so. And I think as he's gotten more political, possibly if you had to overly define and assess the Tesla investor base as being a particular way, he seems to be moving a slightly different way. But I think it comes down to to me. What do you think about the company without Elon Musk?

6:04And not because he's going to leave or stay, but really to truly look at the fundamentals, because historically Tesla always traded at a premium to its intrinsic value, to its fundamentals, to it. It was a tech company. It was Elon. It was this. It was that. The question is now on some level, is that holding the company back? And in my view, as someone who's been bearish on Tesla for a long time, I think if you could neutralize the Elon factor and look at Tesla, the company that has margin pressure, that certainly has a competitive landscape that's changing, has possibly some China issues. But at some point, you've had a lot of bad news priced in here.

6:34So to me, Elon is actually and the Tesla buzz and the Tesla intangibles that always allowed people to throw whatever target they wanted on this stock. I think that's now in question, whereas Tesla, the car company, is actually kind of interesting and getting kind of interesting based upon the fall it's had. And obviously, though, still the leadership position has an EV. I think that's a great point in that we are approaching a much more political time of year as we approach the election. And who knows how political he can be and also the role that X may play in this election. And will that ultimately be a negative for Tesla shareholders?

7:09shareholders in the form of people potentially not buying the cars, not buying the car, backlash from what he's going to say, being too concerned, whatever you want it. Fair enough. I mean, that's I'm sure it'll be out there. I'm not sure that's going to be a factor, but fair enough. I mean, you know, and the pay package stuff, you have Ron Barron, who's one of the biggest shareholders. He said, I think it was last week on Squawk Box, that he was absolutely for the pay package. I think Cathie Wood today said similar. Her base case, I think I got this right, was$5 trillion market cap for Tesla.

7:37I don't know necessarily how she gets there. But, you know, there are still a lot of people very positive on the name. I'll say this to Tim's point. Yeah, I mean, at its core, they're excellent at what they do. The problem, of course, is valuation is now a concern because of the margin pressures they've been facing. So when things were great and they enjoyed those margins, everybody was sort of on board. Now, when margins are basically at legacy auto levels, people are starting to examine this. And I do think that's why the stock will continue to be under pressure. Knowing, though, that the Fed is going to start cutting rates, doesn't that help?

8:09Weren't there complaints that, you know, it costs too much to borrow money to buy a car, and that was certainly hurting Tesla sales. And so with that sort of going away, does that help at all, do you think? It certainly doesn't hurt. I'm just not sure if that's a large enough catalyst. For one, I think we're going to get one, maybe two cuts, and I don't really think that's enough to really spurn along, you know. And isn't that the same argument for almost anything? Well, yeah. I mean, I don't think the market is saying, oh, now I think the Fed's more in play. I can buy auto companies. I can buy home builders.

8:40I mean, the housing sector is something different. Yeah. I mean, clearly, I think it plays into durable goods. And I think Tesla falls within that bucket. So, sure, I would say modest positive. But back to Tim's point in terms of how you're kind of valuing this company, I think if you're really looking at it as purely an auto play, then, yes, I'm exactly with him. But I think the core thesis around this company, especially now, is the autonomous driving, is the artificial intelligence, is all of the other extra offerings that are leading up to its valuation, which I think is either undervalued, if you think all of those things are still coming in, it's a new secular trend, or grossly overvalued if you're looking at it as a traditional autoplay.

9:21All right. We are just getting word that the shareholder vote has closed and they have ratified his pay package. We'll get some more details from Philibow as we have it. But pay package is a go. So theoretically, Elon Musk. The court needs to ratify the court, which they will. I think they will. So strong. But does package package equal equals Elon happiness equals, you know, who who really controls the assets? And it gets back to as much as because now he has the power. He cemented his ability to do whatever he wants, really. So, you know, that's something that I think on some level is made there be as big of a risk as there's been.

9:59Because, again, he's in a position now to do whatever he wants. He's getting paid. He could actually, you know, I think he doesn't necessarily have to guarantee. More risk that he possibly takes his ball and goes home. Now that he's guaranteed to have the profits and the profitability here, he, you know, he could do whatever he wants. I do come back to, though, he does have a lot of skin in the game. To the extent that he says, Tesla, I don't really care about you anymore, he's going to take a big hit personally. Sure. Right? So I think that alone, maybe, you know, he's Elon. He can do whatever.

10:29But I would think that's a reasonably large incentive to continue to work hard for Tesla. You know, Tim brings up, and I didn't think of it that way, but it's the professional athlete thing. You know, once you pay a guy or a gal and they know they're locked in for a period of time. Like Giancarlo. Yeah. Yeah, so most of the guys on the Mets team. But, you know, then they get lazy and really that's when they basically mail it, start to mail it in. So it's interesting. But to your point, he still has a lot of skin. So it behooves him for the company to do well. With that said, I think if this rallies up to that$200 level-ish, which could happen, sell the stock.

11:02Immediate stock reaction was up one and a half or so percent. We're dropping a little bit lower than that, up one plus. But let's get to Phil LeBeau in the meantime with more details. Phil. Hey, Melissa, the man of the hour, Elon Musk. at least man of the hour for the test. The shareholders who are at the company's headquarters in Austin, Texas, is about to take the stage. No doubt we'll be probably doing some Q &A at that time. That's the expectation. As you mentioned, the shareholder proposals in question, including the approval of his$56 billion compensation package, or$56 billion in 2018, roughly$46, $47 billion today, that has been approved.

11:38And no surprise, given the fact that these are shareholders at the company's headquarters in Texas. There was a huge applause when they announced that. Also a huge applause when they announced that the company has approved or shareholders have approved reincorporating from Delaware to Texas. So again, we will be hearing from Elon Musk shortly. They did not give vote percentages, Melissa, so we don't know by what margin both of these proposals were approved, only that they were approved. And with that, I'll send it back to you as soon as we hear from Elon anything of noteworthiness regarding the state of the company.

12:15We'll let you know. Thank you, Phil. Phil LeBeau with the latest there. Tesla stock up one percent on top of a three percent gain in the regular session. Let's get back to the markets now and inflation. May's producer price index pulling back point two percent from last month. Economists were expecting PPI to rise month on month. That print sending treasury yields falling with the 10 year now at its lowest level since early April and helped the S &P and Nasdaq. had another new round of records here. The rest of the reaction, the markets, though, I mean, it didn't really make much sense. Yeah, very odd.

12:47I mean, the bond move, I guess, makes sense. And, you know, since we had a call at 12 o 'clock, 1230, and we had the conversation about the Treasury auction was coming up, and it was a very good Treasury auction, and you saw yields took another leg lower. So that argument that I've been making, at least the last couple of auctions, is not holding any water. But I will continue to make it. You know, I still think yields probably start to continue to go higher. So yesterday was an interesting little late day reversal in terms of yields. Today, obviously, bond market went up, yields went down. But I'm still one of the few people out there that think the path of least resistance is higher.

13:20Yeah. Small caps were notable laggard in today's session. Homebuilders didn't react to the falling yields. Yeah, I was surprised. A number of things that would be rate sensitive, a lot of related things the homebuilder space didn't react particularly well. Well, you know, yesterday they had a very good day on similar news, right, CPI instead of PPI. But I think it's out of steam. And so this bull market is just narrowing and narrowing, which I don't know. It starts to be a scary shaped chart for all of them, particularly. Today I bought some puts in NVIDIA, which I just felt like this run is just extraordinary.

13:56and I happen to be a long-term shareholder so you can buy puts and not trigger it and keep your long-term tax status. But I don't know, that chart is just straight vertical. From May 22nd, you've essentially seen all relative performance of everything other than the NASDAQ and the S &P goes straight down. And I mean the Dow Jones, I mean small caps. Small caps are down on the year or effectively were intraday today. You've had a real outperformance, not only of the S &P, but obviously of the NASDAQ. And what's fascinating is that actually we were starting to get some breadth in markets. We were starting to see global markets.

14:38Global markets have also hit the skids, ironically, as their central banks have cut. It's been a really difficult week. So it's to me a case where you can make an argument that this is the green light again for mega cap tech. And now we had it in semiconductors. Today, the Nasdaq closed at a fresh relative all time high to the S &P. That's important because it wasn't making relative highs. It was making lows. Back to Jan 24 was the last time we made a fresh relative high. And then before that, you know, you can take it back to the summer. With Apple now a horse that seems to be back in the race and what semiconductors are doing.

15:13And the fact of the matter is, you know, this is something that I think is very good news for the market. Slower growth is great for the top 10 largest tech companies in the world, at least from a market perspective. Yeah, I tend to agree in terms of leadership shift or leadership continuation in that very concentrated group. I was very surprised to see both VIX continue to trade down and seeing the more rate sensitive sectors, particularly small caps, part of my DIGS trade, underperform. You would think that some of those things would kind of reconcile them. DIGS. DIGS. DIGS acronym. Yeah, you have a lot of time to Blysev.

15:49Yeah, you had to clarify that. Yeah, but the small caps underperformance, continued underperformance is pretty concerning, particularly being that you are starting to get these inflation readings. With that said, I would juxtapose the first three months of this year versus the last three that we've gotten. You've gotten two completely different sides of the coin from the inflation data. So I still think the market perhaps had pulled forward all these rate cut expectations. And now, yes, there is some follow through, but you continue to see a push and pull in that inflation data. And until the Fed gets an extended period of observation of the trend going one direction, I think it's tough to get in front of that any further.

16:27You mentioned to Russell, IWM can't get through 208. We've said it now dozens of times. And that is interesting. And I'll throw it to others. The transports, you know, it bounced, I think, on Lyft and Uber the other day. Still, though, that's been the lower trajectory now for quite some time. And then throw in the KRE, which bounced slightly the last couple of days, and it's right back lower again. I mean, the regional banks, one would think, should get some relief with rates going lower. And they're not seeing it at all in terms of the stocks. I don't think you're excited to see a declining PPI, just to be clear.

16:59I think some of the trades that are attached to that are, of course, miners' resources and whatnot. And they've had a really difficult couple of days. But especially in other parts of the world, when China has declining PPI, that's bad news for that economy. Now, we're not a big industrial economy anymore. But to the extent that we don't want to see a lot of these price inputs fall apart, I know that sounds counter to the inflation argument. But we're getting bouncing in the inflation argument coming from the labor market and coming from services, which is what we need. So I'm not sure I want to see PPI fall out of bed here.

17:30And I think the fascinating part of what we've had over the last couple of days is you have seen interesting job data that is telling you that you're getting a little bit of a sweet spot for now. We've got a news alert here on OpenAI. Kate Rooney's got all the details. Hey, Kate. Hey there, Mel. Yeah, so OpenAI is adding a new board member to help beef up its cybersecurity efforts. Paul Nakasone is a retired Army general and the longest serving leader of U.S. Cyber Command, also was a director of the NSA. Nakasone will also join OpenAI's new safety and security committee, rather, which makes security recommendations to the board around OpenAI projects.

18:09In a statement, the company says Nakasone's appointment reflects OpenAI's commitment to safety and security and then underscores the growing significance of cybersecurity in this landscape. It does come after a major corporate overhaul. OpenAI's board, of course, was made up largely of academics when Sam Altman was fired last year and then was reinstated. Those early board members were replaced with more experienced executives, for example, tech executive Brett Taylor and former Treasury Secretary Larry Summers. Mel, back to you. Kate, thanks. Kate Rooney in New York today. Coming up, Trump on the trail.

18:44The former president holding a private meeting with U.S. business leaders today. The the role Bitcoin might play in his reelection bid. That's next. Plus, after hours action in Adobe, the software giant on the move after its latest results and numbers and the headlines from the call next. More Fast Money in two.

19:05Welcome back to Fast Money. Former President Donald Trump making headlines today after meeting with U.S. business leaders and Republican lawmakers. Trump covering everything from Bitcoin to eliminating the federal income tax at his latest stop on the campaign trail. Emily Wilkins joins us now with all the details. Hey, Emily. Hey, Melissa. Yeah, Trump covered a wide range of topics. And true to form, some of his suggestions are already raising eyebrows. At a meeting this morning with House Republicans, Trump proposed an all-tariff policy that he said could lead to getting rid of the income tax.

19:34Now, just to be clear, this is just an idea being thrown out there. But it is in line with Trump's push for higher tariffs. And this includes using tariffs to leverage negotiating power with quote-unquote bad actors. It also comes as Republicans are preparing to update their signature tax law before major provisions expire in 2025. Trump also spoke with lawmakers and the CEOs about eliminating taxes on tipped wages, and he chatted with CEOs about bringing the corporate rate down to 20 percent. And it wasn't all policy today. Trump turns 78 tomorrow. Lawmakers on the Hill saying him happy birthday and served him a cake with the numbers 45 and 47 on it, a clear indication of what they're hoping happens in November.

20:14So he's hoping that by eliminating the federal, the individual federal income tax, and he can offset it by raising tariffs, that whole bucket. That is the proposal that he has put forward. Now, I think there are some lawmakers who seem very interested in it. I think for a lot of lawmakers, they think that that is a step too far. They do want to see the individual income tax, though, reduced. Obviously, they raised that deduction back in 2017. They want to make sure they are continuing that. And I think something you are going to hear from a lot of Republicans are, hey, last time that we held the House, the Senate and the White House in 2017, we were able to lower taxes on individuals and businesses.

20:53And if you elect us back, we will do it again in 2025. All right. Emily, thank you. Emily Wilkins. Yes. Very interesting proposals here. And I guess the question is, will it stimulate the eliminating federal income taxes for one, reducing corporate tax? Will it stimulate the economy enough to offset the idea that we will have to raise a lot more money elsewhere by doing other things like perhaps. I mean, I realize the presumption here is this is a theoretical dynamic to, again, have leverage there to to equate income tax on an individual level against, you know, the potential tariff income is not going to work at all.

21:33Everything that you hear, though, is budget unfriendly and inflationary. And these are two places right now we've just you know, we're doing our best to tread water. And all we do is talk about the impact on Treasury yields from just the credit fundamentals of our country. So hate it from a credit perspective. Totally agree. I mean, it used to be the Republicans were a party of fiscal, you know, conservatism. Bill parties. Both parties now are just, you know, have at it, as Dan would say, and just spend, spend, spend. Worry about it later. We're getting to be later. It's getting to be later. So, yeah, anything that's that budget problematic, I don't know.

22:12I don't know if that's right. He's running for president, though. I mean, we all understand that. Yeah. Promise everything. Absolutely. And he's embracing cryptocurrency, which is something he railed against, I believe, many years ago. he's smart to do that. I mean, you're going to capture a certain demographic. That millennial vote is going to really embrace that. So you say what you want to say about the man. I mean, in terms of the political side of things, he does very bright things in his attempt to be reelected. So, you know, that is what it is right now. And you know, a lot of people are going to run with this tonight on the news.

22:44Yeah. Yeah. I mean, the protectionism definitely leads to inflation. And then the unshoring of crypto mining, to me, wipes out everything that underscores what Bitcoin is, which is supposed to be a separate store of value. So now to somehow have that correlated to the U.S. dollar, you really worry if the people that are championing that run for the hills, if they see that no longer being decoupled and independent. Coming up, Adobe headlining today's After Hours Action. We'll go inside the software giant's latest results and We'll bring you the highlights from the call next, plus a media stock meltdown.