In a recent earnings call, Tesla CEO Elon Musk expressed his desire to increase his ownership stake in the electric vehicle (EV) company from 13% to 25%. Musk’s goal is not to gain additional financial benefits or total control over Tesla, but rather to prevent outside shareholders from swaying major decisions.
Musk’s Concerns with Institutional Shareholder Services (ISS)
Musk cited Institutional Shareholder Services (ISS), the world’s largest shareholder advisory firm, as a concern. ISS provides research-backed recommendations for investors on how to vote at corporate shareholder meetings. In recent years, ISS has advised Tesla shareholders to oust Kimbal Musk, Elon’s brother, from the company’s board and to vote against re-electing Robyn Denholm as Tesla’s board chairperson.
“I call them ISIS,” Musk said on the call. “There’s a lot of activists that basically infiltrate those organizations and have strange ideas about what should be done. So, I want to have enough to be influential.”
The Idea of Dual-Class Stock Structure
Musk has floated the idea of implementing a dual-class stock structure, where holders of a special class of shares have superior voting rights to others. However, he has been told that it’s impossible for Tesla as a publicly traded company. Musk is not seeking additional economics from this ownership increase, but rather wants to be an effective steward of the powerful technology that Tesla possesses.
Tesla’s Core Business Slowdown and Revenue
Tesla’s core business, selling electric vehicles, has shown signs of slowing down. The company reported 25.17 billion in revenue and 7.93 billion in profit for the three months ended December 2023, falling short of analyst expectations. This sent Tesla’s stock down more than 12% on January 25, 2024, and the stock price is down more than 25% since the beginning of the year.
The Conflict of Interest with xAI
Musk’s desire for 25% ownership in Tesla has raised concerns among shareholders, particularly regarding his potential conflict of interest between Tesla and xAI, his AI startup. Musk’s comments about building AI and robotics products outside of Tesla unless he owns a quarter of the company have added to this concern.
Musk’s Explanation of His Request
During the earnings conference call, Musk attempted to explain his position, stating that his concern is the creation of an artificial intelligence and robotics juggernaut of immense capability and power. He wants to ensure he has enough influence over the company to prevent being voted out by a random shareholder advisory firm.
Despite Musk’s explanation, Tesla shareholders remain skeptical of his request. Musk’s control over Tesla is already significant, and the recent stock crash following Tesla’s earnings call has raised questions about the company’s future.
