Elon Musk took to his social-media platform X to, essentially, threaten Tesla’s board of directors over executive compensation.
Musk said he wants more voting power at
Tesla
if he is to grow the electric-vehicle maker into a leader in artificial intelligence and robotics. The implication: No shares? Then Musk will do his AI-related work in another company.
That’s quite a thought for investors to digest.
Tesla
stock was up 2% Tuesday and headed for a fifth consecutive drop, while the
S&P 500
had declined 0.the 1%and
Nasdaq Composite
was little changed. Coming into Tuesday’s trading, Tesla stock has fallen about 12% this year.
The Tesla CEO, who currently owns a 13% stake in the company, said he wants around 25% voting control to be comfortable pushing the company’s AI ambitions.
Musk also holds some 300 million unexercised stock options, representing about 9% of Tesla’s 3.2 billion shares outstanding. Including those, the world’s richest human controls about 20% of Tesla stock. That doesn’t seem to be enough.
“I am uncomfortable growing Tesla to be a leader in AI and robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” Musk said in a post on X.
Unless that is the case, Musk said, he would prefer to build products outside of Tesla.
Musk went on to note that “the Tesla board is great” and that a pending decision in a lawsuit over his compensation package was the reason a new compensation plan has yet to be discussed. The 2018 lawsuit, brought by Tesla shareholder Richard J. Tornetta, claims that the compensation committee wasn’t independent and was influenced by Musk when it awarded him stock options.
The billionaire warned that voting power of 15% or less “makes a takeover by dubious interests too easy.”
Wall Street views Tesla not only as a car company but as a disruptive leader in AI technology, explained Wedbush analyst Dan Ives in a report Tuesday. Tesla uses its AI computing platform to help train its autonomous driving software.
Musk creating AI initiatives outside of Tesla would be a hit to the stock, added Ives. “The Board and top shareholders are well aware of this dynamic and key man risk.”
Tesla’s board doesn’t necessarily have to award more stock. They could award supervoting stock, or shares that have more voting rights than regular shares. That is one way to keep Musk’s voting control at about 25% without too many extra shares being issued. Musk hinted in another tweet that a dual-voting class share structure would be acceptable to him.
Tesla didn’t respond to a request for comment about compensation from Barron’s early Tuesday.
Ives called the tweet and conversation a “distraction” for investors and another “firestorm.” Ives rates shares Buy and has a $350 price target on Tesla stock.
The irony, of course, is that Musk sold billions of dollars of Tesla stock in 2022 to help fund his purchase of Twitter, which is now called X. That cut his ownership stake in the company by roughly 3 or 4 percentage points.
With that stock and the options, he would be very close to 25%.
U.S.-listed Chinese EV stocks were lower ahead of the open following a slump in Asian markets.
Li Auto
fell 4.8%,
NIO
declined 1.7%, and
XPeng
was down 6%. Hong Kong-listed shares of EV leader
BYD
shares were down 0.8%.
Write to Callum Keown at [email protected]
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