June 10 (Reuters) - With major Tesla shareholders

appearing divided over whether to endorse Elon Musk's $56

billion pay package, the company also is looking for support

from retail investors who make up an unusually high percentage

of the electric carmaker's ownership base.

Small investors tend to favor management, but they often

don't bother to vote, experts said.

The company's June 13 annual meeting is shaping up as a

referendum on Musk's leadership, following a Delaware court's

ruling striking down the hefty pay package. The company has

asked investors to vote to reaffirm it and Musk stands to

control more than 20% of the company if he gets it. A 'no' vote

would be a rebuke with unknown consequences.

Tesla also proposes reincorporating in Texas instead of

Delaware and re-electing two directors, including Musk's

brother, Kimbal.

While there are a dozen items up for a vote, Tesla is

focused on the pay vote and the move to Texas in an ongoing

outreach campaign to small shareholders that includes a website,

engagement with online influencers, and factory tours for a few

of those who vote.

Big investors have sent mixed signals. T. Rowe Price ( TROW )

has said the package showed "strong alignment" with

investor interests. But the California Public Employees'

Retirement System meanwhile has said it will likely oppose

Musk's pay as not commensurate with Tesla's performance, and

Norway's sovereign wealth fund came out against the pay package

on Saturday.

Although small investors have an array of opinions, experts

in corporate vote campaigns say the size and CEO-friendly nature

of many individual investors at Tesla make them an obvious

target.

"The man ends up 10x-ing my investment and he's given

nothing? It doesn't seem right or fair," said Andrew Theyken

Bench, a lawyer in Allentown, Pennsylvania with fewer than 5,000

Tesla shares, who voted by proxy with management on all items at

the meeting, including Musk's pay.

In a post on his social media platform X on Saturday Musk

wrote: "So far, roughly 90% of retail shareholders who have

voted have voted in favor of both resolutions," apparently

including the one on his pay.

Bruce Goldfarb, president of Okapi Partners, a proxy

solicitor not involved in this vote, said 90% support from

retail investors would be "about normal" since the category

generally favors management. But such investors usually don't

vote, posing a challenge for Tesla.

"Retail shareholders are wildly apathetic even if they're

supportive," Goldfarb said.

Mom-and-pop investors only voted about 30% of their shares

in 2023, according to vote-processing company Broadridge,

compared to 80% for institutional investors.

The theme of fairness to Musk is the heart of Tesla's

campaign. Chair Robyn Denholm described the vote as being about

"fairness, respect and the future of Tesla." She also warned

Musk has limited time and a variety of interests.

"We want those ideas, that energy and that time to be at

Tesla, for the benefit of you, our owners. But that requires

reciprocal respect," she wrote in a June 5 letter.

A Tesla representative declined to comment.

LEADING THE PACK

Data and research firm S&P Global Market Intelligence found

that as of June 5, about 43% of Tesla's common stock is held by

the "public and other" category of shareholders that includes

retail investors and others outside of the main categories of

institutional investors and company insiders.

That is the most of any of the 15 largest companies in the

S&P 500.

Musk's own stake in the company is around 13%. Among top

outside investors, Vanguard has 7.2% of the shares and BlackRock ( BLK )

has 5.9%, according to Tesla's proxy. Neither would

comment about their voting intentions.

GUT ASSESSMENT: 50% CHANCE

Both major proxy advisers, Institutional Shareholder

Services and Glass Lewis, have recommended investors vote

against ratification of the pay package, calling it excessive.

That's a bad sign for Tesla. Among Russell 3000 companies

from 2010 to 2020 only 66% of "say on pay" resolutions passed

when both proxy advisers recommended votes against them,

compared with 99% when both supported the pay, said University

of Utah finance professor Chong Shu.

Omar Qazi, an X.com user with 475,300 followers who posts

using the handle @WholeMarsBlog and often gets public replies

from Musk on the platform, said his "gut assessment" was there

is only a 50% chance that a majority of Tesla investors back the

re-ratification of Musk's pay.

"Many support Musk and see the importance of compensating

him but many are also upset about a variety of factors:

politics, slowing sales, stock price etc," Qazi said by direct

message on X.

Shares at Tesla closed Friday at $177.48, well below the

$248.48 where they ended trading in 2023, as the company faces

growing competition and questions about its plans for new

models.

A DEAL'S A DEAL

Nonetheless Musk still enjoys support online from

influential users. In addition to Qazi these include Alexandra

Merz, who posts as @TeslaBoomerMama on X.com and has had several

posts reposted by Musk to call attention to voting.

Those posts urged non-U.S. banks and brokerages to allow

Telsa investors to vote, something the companies' systems did

not previously allow. Several subsequently did so including

Sweden's Nordnet.

"I've been invested in other companies before and I've never

seen the amount of effort by an informal community to get out

the vote like there is on this one," said Troy Dillon, a retired

U.S. Air Force officer in Florida and Tesla shareholder.

As for the pay package, "The deal was the deal," Dillon

said. He is voting for it.