Tesla shareholders are voting to approve a $56 billion US pay package for Elon Musk and to move the electric vehicle maker's legal home to Texas, the CEO said on social media on Wednesday, adding that passage was by wide margins.

"Thanks for your support!!" Musk said in his post on X.

Overwhelming shareholder approval of the largest remuneration terms in U.S. corporate history could allay investor concerns about Musk's future at the company, while giving the electric carmaker ammunition in its fight to reverse a court decision to void the pay package.

Tesla shares were up 6.6 per cent in pre-market trading on Thursday after rising 3.9 per cent a day before the shareholder meet. Up until then, shares of Tesla Inc. had slumped more than 30 per cent this year with the company warning of "notably lower" sales growth in 2024.

Musk would still face a lengthy legal battle to convince the Delaware judge who said the Tesla board was "beholden" to him, while potentially fielding fresh lawsuits over the latest vote.

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"Even if the shareholders do approve the old package, it is not clear that the Delaware court will allow that vote to be effective," said Adam Badawi, a law professor at the University of California, Berkeley.

The result will be announced at a meeting at Tesla's headquarters in Texas at 4:30 p.m. ET on Thursday.

Large shareholders haven't tipped their hand

Major proxy firms Glass Lewis and Institutional Shareholder Services (ISS) had urged shareholders to reject the pay package, and large investors including Norway's sovereign wealth fund and California's State Teachers Retirement System had said they would vote against it.

Tesla's top five institutional shareholders — Vanguard, BlackRock, State Street, Geode Capital and Capital Research — either said they don't announce their votes or wouldn't comment. They control about 17 per cent of the votes.

Shareholders are allowed to change their vote up to the start of the annual meeting.

Tesla shareholders also cast ballots on other proposals including the move of its legal headquarters from Delaware to Texas. Most major American corporations have registered in Delaware for tax benefits and convenience, as its Court of Chancery has long resolved corporate cases, but the battle over pay has seen Musk look to register the company in Austin.

Texas Governor Greg Abbott congratulated Musk after his post, saying on X: "Welcome to a state that has neither a personal nor a corporate income tax."

Also up for a vote is the re-election of two board members: Musk's brother Kimbal and James Murdoch, the former Fox executive who is the son of News Corp. media baron Rupert Murdoch.

Musk's AI threat

Some investors viewed the vote on Musk's pay as a test of confidence in his leadership. While he is undoubtedly Tesla's driving force and is credited with much of its success, the company has recently seen slowing sales and profits.

Tesla's stock has lost nearly 60 per cent of its value from its peak in 2021, when Musk started selling billions of dollars' worth of his stake partly to help finance his purchase of Twitter — which he has rebranded as X — sparking concerns that he would be spread too thin. He now runs six firms, including rocket-builder SpaceX and the artificial intelligence firm xAI, which Musk created in 2023.

Musk's outspokenness and knack for creating controversy have also weighed on Tesla's reputation and sales. Critics have said he has trafficked in antisemitic tropes and xenophobia on X, leading some blue-chip companies to pull or suspend advertising on the social media site.

The pay package would enable Musk to strengthen ownership "at the expense of diluting the value of those belonging to other shareholders," Marcie Frost, CEO of the California Public Employees' Retirement System said.

Tesla has been drumming up support for Musk's pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote.

Company executives have posted messages on X saying Musk is critical to Tesla's success. Tesla has run social media ads, and Musk has promised a personal tour of Tesla's factory in Texas to some shareholders who cast votes.

The board said the world's richest person deserves the package, because he hit all the ambitious targets on market value, revenue and profitability.

The pay package is also needed to keep Musk devoted to Tesla, the board said, even though the Delaware judge said the 2018 pay plan failed to make sure that Musk committed a substantial amount of time to Tesla.

Musk has threatened to build AI and robotics products outside Tesla if he fails to gain enough voting control, which requires the 2018 pay package to be approved.

Still unresolved in Delaware courts

The Delaware court that invalidated the compensation package had said the plan was proposed by a conflicted board with close personal and financial ties to its top executive.

The board held the shareholder vote as a way to bolster its appeal of the ruling, in which the judge cited the board's failure to fully inform shareholders before approving the pay package in 2018.

"How the shareholders vote now doesn't really answer the question whether the board violated its duties in 2018, and that's the issue on appeal," Ann Lipton, a corporate law professor at Tulane University in New Orleans, said.

Musk has to wait months or years to get his pay package restored as appeals wind their way up to Delaware's Supreme Court.