Elon Musk Aims for More Control of Tesla, Seeks 25% Voting Power

In a recent announcement, Elon Musk, the CEO of Tesla and SpaceX, has expressed his desire for increased control over his electric vehicle empire. Musk, who also happens to be the owner of the social network formerly known as Twitter, is now looking to acquire approximately 25% of the voting power in Tesla, a move that would solidify his influence over the company.

Musk

Currently, Musk holds around 13% of Tesla’s shares, which accounts for roughly 411 million shares out of the company’s total of 3.19 billion outstanding shares. This sizable stake is especially significant when considering that Musk sold billions of dollars’ worth of his Tesla shares in 2022, primarily to fund a leveraged buyout of Twitter worth a staggering $44 billion.

With his previous stock sell-off behind him, Musk now has his sights set on expanding his control over Tesla even further. In a recent statement, Musk explained his thinking, stating, “I am uncomfortable with the idea of growing Tesla to become a leader in AI and robotics without having approximately 25% voting control. I believe this level of control would grant me the necessary influence, while still allowing for the possibility of being overturned if need be.”

Furthermore, Musk voiced his concerns over the misconception that Tesla is simply a single startup, highlighting the stark contrast between what Tesla has achieved and what other automotive companies, such as GM, have done. Musk argues that Tesla is more than just an ordinary car manufacturer. To further emphasize his point, he pointed out that institutional investors, like Fidelity, hold similar stakes to his own, yet do not possess the same level of involvement in the day-to-day operations of the company.

 

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Although Musk’s recent remarks seem at odds with his previous statements regarding the significance of AI and robotics to Tesla’s overall value proposition, it is crucial to remember that Tesla has indeed positioned itself as a key player in these fields. Last year, during Tesla’s first-quarter earnings call, Musk confidently predicted that the company’s humanoid robot named Optimus would eventually surpass the value of Tesla’s car business and its full self-driving capabilities. This optimistic outlook was further reinforced during Tesla AI Day in September when an early prototype of the Optimus robot was unveiled, showcasing Tesla’s depth of expertise in AI, compute hardware, and robotics.

Interestingly, Musk’s statements also sparked a dispute with Roth Capital senior research analyst Craig Irwin, who appeared on CNBC’s Closing Bell Overtime. Irwin expressed his belief that Tesla was overvalued, particularly when compared to Toyota, a company that has been highly successful in the hybrid electric vehicle market. However, Musk vehemently argued against this comparison, asserting that Tesla is, in fact, an AI and robotics company.

Despite Tesla’s core revenue stream still predominantly coming from its automotive segment, the company’s focus has considerably shifted towards products and services influenced by artificial intelligence, robotics, and automation. This strategic shift has been clearly outlined in Tesla’s third-quarter 2023 financial filings.

 

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To support his claim that Tesla remains at the forefront of AI and robotics, Musk recently posted a video clip on his social network showing an Optimus robot prototype folding laundry. Though the robot was being operated remotely rather than autonomously, the demonstration highlighted Tesla’s advancements in this field.

Musk’s desire for heightened control over Tesla undoubtedly places immense pressure on the company’s board of directors. As they grapple with important decisions surrounding CEO and director compensation, Tesla’s board must also address investor concerns related to a range of issues. Some of these concerns include worries about Musk’s divided attention due to his involvement in SpaceX, X Corp., and other ventures in addition to Tesla. Critics have also raised questions about Musk’s polarizing political and cultural commentary, including recent tweets that seemingly disparaged corporate diversity and inclusion initiatives. Moreover, ongoing federal investigations involving Musk and Tesla, as well as reported concerns about the CEO’s alleged drug use, have triggered further unease among investors.

 

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It is worth noting that Musk is currently embroiled in a trial in Delaware regarding his $56 billion pay package from Tesla, a scheme that made him one of the wealthiest individuals globally. Shareholder Richard J. Tornetta has filed a lawsuit against Musk and Tesla, alleging that his compensation was excessive, and it constituted a breach of fiduciary duty by both Musk and the company’s board.

Musk revealed that Tesla’s board of directors is postponing the establishment of a new compensation plan for him until the Tornetta case is resolved in the Delaware chancery court. Emphasizing the significance of having 25% voting control, Musk asserted that with this level of influence, his decisions could still be overridden if twice as many shareholders voted against him. On the other hand, if his ownership stake were to fall to 15% or lower, the potential for takeovers by questionable parties would become worryingly feasible.

In a prior Delaware trial, several Tesla board members agreed to a settlement by repaying $735 million to the company. The settlement aimed to address concerns related to their own compensation as directors.

 

 

Source:cnbc.com

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