Elon Musk expressed discomfort over growing Tesla into an industry leader for AI & robotics without getting around 25% voting power, sending shares down approximately 2% in premarket trading.
Elon Musk and his board face many hurdles in 2024. This issue is among many others they must navigate.
AI & Robotics
Elon Musk said he is uneasy growing Tesla into an AI and robotics leader without a compensation plan that gives him ownership of approximately 25% of the company’s stock, approximately double what has historically been offered as compensation plans to him by competitors.
At present, Mr. Lee owns 13% of the company and has invested in several new projects including the Optimus robot and Dojo supercomputer which aim to advance machine-learning models used for self-driving cars.
Analysts warn that Tesla relies heavily on selling electric vehicles for revenue, and analysts fear a competition or complement from Musk launching his own AI venture could present issues for them. Ives who still holds an “outperform” rating said such an announcement could be detrimental to Tesla and could “harm its story”.
Elon Musk made his position clear Monday evening through posts to social media platform X, noting his preference for building these products outside Tesla, rather than making them within it. According to him, Tesla resembles more closely an amalgam of small start-ups than one of the world’s major automakers like General Motors.
Market Cap
Market Cap, or Total Market Value, is an integral piece of information when investing in stocks. It measures the total value of outstanding shares multiplied by their share price – an indicator of total market value that thinkorswim’s Analyze tab provides real-time.
Musk states he would not feel confident expanding Tesla into AI and robotics without owning 25% of voting control, nearly double his current stake. Should that not occur, he suggested creating products outside Tesla instead.
The CEO has asked his board to put together another substantial compensation package for him, yet no plan has been finalized due to shareholder Richard J. Tornetta’s lawsuit filed in Delaware courts against them and various directors claiming that Tesla’s current compensation plan exceeds legal boundaries and violates fiduciary duties. While board members wish they could implement compensation packages now for Mr. Musk as soon as possible, these delays have prevented that from happening yet.
Leverage
Tesla, the world’s most valuable electric carmaker, has recently made large bets in artificial intelligence and robotics but its revenues still mostly consist of cars – leaving some investors to question whether its board has sufficient incentives for keeping CEO Elon Musk motivated within the company.
In a post to social media platform X, Elon Musk expressed discomfort at leading Tesla into AI and Robotics without having a voting control of 25% or greater. That level would provide him with enough influence without making him immune from removal by shareholders.
Elon Musk also encouraged Tesla shareholders to support his proposal for a dual-class share structure. Dual-class shares allow shareholders to vote differently depending on who their founders or early investors are; founders or early investors typically have more influence while other shareholders typically have less. Such structures are popular at tech companies and analysts may view them as an effective strategy to increase Tesla’s valuation; shares have already seen 13% increases this year alone.
Conflict with Board
Tesla’s board, which approved Musk’s historic compensation package, is composed mainly of close personal relationships between him and its members, creating a potential conflict of interest according to corporate governance experts.
Elon Musk wrote on Monday’s post to X that he is only comfortable creating AI/robotics outside Tesla Inc with 25% voting control or more, and would accept dual-class share structures to achieve his goals.
Investors have also requested the company add an independent member to its nine-member board. Of the current board members – Ira Ehrenpreis, James Murdoch and Antonio Gracias – three have strong ties with Musk; therefore raising concerns over their independence. A judge is currently reviewing this matter; their verdict could take weeks or months before being rendered; specifically addressing whether or not the board acted in good faith when creating this deal.
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