Elon Musk took to his social media platform X to threaten Tesla’s board of directors over executive compensation.
Musk said he wants more voting power in Tesla if he wants to develop the electric car maker into a leader in the field of artificial intelligence and robotics. Implied: No arrows? Then Musk will do his AI work at another company.
This is a good idea for investors to embrace. Tesla stock rose 2% on Tuesday and is headed for its fifth straight decline, while Tesla stock
Standard & Poor’s 500
It decreased by 0.1% and
Nasdaq Composite
Not much has changed. Entering trading Tuesday, Tesla stock was down about 12% this year.
The Tesla CEO, who currently owns a 13% stake in the company, said he wants about 25% voting control to be comfortable advancing the company’s AI ambitions.
Musk also has about 300 million unexercised stock options, which represents about 9% of Tesla’s outstanding shares of 3.2 billion shares. Including these, the world’s richest person controls about 20% of Tesla shares. This doesn’t seem to be enough.
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“I’m uncomfortable with Tesla developing into a leader in AI and robotics without roughly 25% voting control. Enough to be influential, but not so much that I can’t be overthrown,” Musk said in a post on X.
Unless that’s the case, Musk said, he would prefer to build products outside of Tesla.
Musk went on to note that “Tesla’s board of directors is great” and that the pending resolution in a lawsuit over his compensation package was the reason the new compensation plan had not yet been discussed. The 2018 lawsuit, filed by Tesla shareholder Richard J. Tornetta, claims the compensation committee was not independent and influenced Musk when it granted him stock options.
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The billionaire warned that voting power of 15% or less “makes capture by questionable interests very easy.”
Wall Street views Tesla not just as a car company but as a leader in artificial intelligence technology, Wedbush analyst Dan Ives explained in a report released Tuesday. Tesla is using its AI computing platform to help train its self-driving software.
Ives added that Musk creating AI initiatives outside of Tesla would be a blow to the stock. “The Board of Directors and major shareholders are well aware of these dynamic and key risks.”
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Tesla’s board doesn’t necessarily have to award more shares. They can grant super-voting shares, or shares that have more voting rights than common shares. This is one way to keep Musk’s voting control at around 25% without issuing a lot of additional shares. Musk hinted at Another tweet That the dual voting class share structure would be acceptable to him.
Tesla did not respond to a request for comment about compensation Baron Early Tuesday.
Ive described the tweet and conversation as a “distraction” for investors and another “firestorm.” Ives is pricing the stock as a buy and has a $350 price target for Tesla stock.
The irony, of course, is that Musk sold billions of dollars of Tesla stock in 2022 to help finance his purchase of Twitter, now called X. That reduced his ownership stake in the company by about 3 or 4 percentage points.
With this stock and options, it would be very close to 25%.
US-listed Chinese electric vehicle shares fell before the open after Asian markets fell. Li Auto fell 4.8%, NIO fell 1.7%, and XPeng
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Decreased by 6%. Shares of BYD, a leading electric vehicle company listed in Hong Kong, fell by 0.8%.
Write to Callum Keown at callum.keown@barrons.com