Musk Threatens to See Other Companies if Tesla Doesn’t up His Voting Power: What the Breakup Could Mean for Your $TSLA Stock and Next EV
We woke up to another series of dramatic Elon Musk headlines today. CNN: “Elon Musk demands another huge payday from Tesla.” Reuters: “Musk wants 25% voting control at Tesla before fulfilling AI goal.” Investing.com: “Tesla down following Elon Musk’s AI ownership comments.”
The truth is a bit more nuanced. I’ll go over Musk’s actual comments and his latest clarifications. But I’ll also explore possible outcomes, including Musk taking his robotics and AI projects elsewhere, and what that would mean for Tesla shareholders and car buyers.
I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned.
— Elon Musk (@elonmusk) January 15, 2024
Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand…
Two Twitter users were discussing Elon Musk’s current compensation from Tesla and how additional money might or might not motivate him. Elon Musk himself weighed in and explained that he does want a greater share of Tesla, but just for voting purposes. Here is his comment:
“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned.
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“Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand that Tesla is not one startup, but a dozen. Simply look at the delta between what Tesla does and GM.
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“As for stock ownership itself being enough motivation, Fidelity and other own similar stakes to me. Why don’t they show up for work?”
Elon Musk via X
Musk posted this response around 4 PM on January 15th, and many of the above headlines were based upon it. Two hours later he made the following clarification.
“I should note that the Tesla board is great. The reason for no new ‘compensation plan’ is that we are still waiting for a decision in my Delaware compensation case. The trial for that was held in 2022, but a verdict has yet to be made.
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“I put ‘compensation plan’ in quotes, because, from my standpoint, this is primarily about ensuring the right amount of voting influence at Tesla.
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“If I have 25%, it means I am influential, but can be overridden if twice as many shareholders vote against me vs for me.
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“At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy.
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“I would be fine with a dual class voting structure to achieve this, but am told it is impossible to achieve post-IPO in Delaware.”
Elon Musk via X
A few key takeaways here: Elon Musk plans to continue pursing both AI and robotics heavily. He hasn’t ruled out building these products outside of Tesla. And finally, he is thinking about a “takeover by dubious interests.” And history shows this is a very real risk. Steve Jobs was famously voted out of his office by Apple’s board. General Motors founder William Durant was even forced out of his job by his board. With members of Tesla’s board expressing concern over Musk’s image and antics, it is wise of him to cement his position.
Musk’s detractors have been quick to point out that he would have much higher voting control if he hadn’t cashed out so much stock to buy Twitter. If he wants more voting power he can buy it like anyone else. They say Musk made his bed and now is the time to sleep in it.
But Tesla has never been Musk’s only company. In addition, there was a Tesla before Elon Musk and there will probably be a Tesla after Elon Musk. Yup, he’s not the company’s founder. One of the critical questions is, will any future Tesla robots or AI products have to compete against another robotics company Musk helped to start or helm? And will Tesla cars have to compete against some new cars Musk helps build elsewhere?
Even the threat of this breakup is enough to send Tesla shares tumbling. So if you own Tesla stock, know that the optics of Elon Musk splitting his time between even more companies, possibly Tesla competitors, will impact its value.
Elon Musk is quick to call Tesla the world’s largest AI and robotics company. And obviously he’s referring to the Tesla robot in development. But he’s also referring to his cars and their driver aid software. Musk continues promising full self driving mode is just around the corner, and describing how these “robot cars” will change transportation and even car ownership. But it’s becoming obvious that it will take longer to teach AI to do what a human driver does than many folks ever expected.
There is one other Musk company experimenting with AI: X (previously Twitter) just rolled out its ChatGPT competitor which is named Grok. Elon Musk currently owns 79% of X. Perhaps the alternative path into robotics he is considering is a hardware division at X.
There is not telling how exactly AI will revolutionize various industries. But it looks like we’ll see major AI-driven shakeups in multiple other industries before we see self-driving cars or widespread humanoid robots. Elon Musk has excelled at taking existing ideas and revolutionizing material sourcing and manufacturing to offer them at a viable pice point. Both electric cars and privatized rocket companies are old ideas that no one was able to pull off on the level of Tesla and Space X.
I expect Musk is intrigued by how AI systems could revolutionize material sourcing and the manufacturing sector. In the automotive market, an advantage of pennies can be a major differentiator. If Elon Musk and Tesla were to part ways, I could see other companies pay him very well to rework their manufacturing process. And he would likely try to leverage AI to do so. Could this consulting company be the AI company he is thinking of starting (the first AI-as-a-service business)?
Teslas are still expensive, but the company is trying to launch an affordable electric compact vehicle (some journalists even refer to it as the Model 2). But there’s a possibility that some other company, whether out of Japan, Detroit, or China, could beat them to it–with Elon Musk’s help.
Next, learn why the Tesla board is concerned over Elon Musks drug use or see more about Musk’s bid to control 25% of Tesla in the video below:
