Count billionaire investor Ron Baron in to support Tesla (TSLA) CEO Elon Musk's controversial pay package next week when it comes up for vote at the EV maker's shareholder meeting.

Baron, chairman and CEO of Baron Capital, whose funds own Tesla stock, wrote in an open letter that Musk’s $56 billion pay package should be approved by shareholders because of his accomplishments for the company and appreciation of Tesla’s stock price over the years.

“Elon is the ultimate ‘key man’ of key man risk,” Baron wrote. “Without his relentless drive and uncompromising standards, there would be no Tesla. Especially considering how he slept on the floor of Tesla’s Fremont factory when the company was going through what he called ‘production hell!’”

Baron noted that when Musk’s original pay package of stock and stock options was approved by shareholders in March 2018, Tesla’s market cap stood at $53.5 billion. As of June 4, Tesla’s market cap is $550.75 billion, and hit a high of $1.24 trillion in November 2021. Baron said Musk “earned his pay" and is crucial to the company’s future success.

The results of the shareholder vote on Musk’s pay package and other resolutions will be announced at Tesla’s shareholder meeting on June 13.

Musk’s all-stock pay package has been embroiled in controversy and was struck down by a Delaware court earlier this year, with the judge finding that Tesla’s board didn’t act “in the best interests” of Tesla shareholders and showed “barely any evidence of negotiations at all.”

Baron argued in his letter that the will of the shareholders, and a legally binding contract between Tesla and Musk, should be honored.

Baron’s funds have profited from its investments in Tesla. In its March 2024 letter backing its investment in the EV market, Baron disclosed that its funds purchased around $400 million in Tesla stock between 2014 and 2016 at an average cost per share of $15, with the investment firm claiming it had made around “$5.5 billion in realized and unrealized profits.”

Tesla is the biggest holding in Baron’s flagship Baron Partners Fund (BPTRX), with a 27.9% long position, followed by Musk’s SpaceX at 11.9%.

While Baron is all in on Musk’s compensation package, other shareholder groups have weighed in against the package. In addition, Proxy adviser firm Glass Lewis told shareholders to vote against Musk’s compensation, arguing both the “excessive size” of the award and the dilutive effect of it on existing shareholders were major concerns. ISS, the other major proxy adviser firm, recommended that shareholders vote down the package as well.

Tesla investors, regardless of how they vote, are anticipating volatility around the results. Morgan Stanley analyst Adam Jonas wrote this week that a small poll of the firm’s institutional clients predicted Tesla's stock may rise if Musk’s package is approved and the stock could be “down significantly” if the package is rejected.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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