Elon Musk’s recent comments about voting control of Tesla Inc. have raised concerns among investors. During Tesla’s earnings conference call, an investor questioned whether retail shareholders should be worried about Musk’s statements. Earlier this month, Musk had expressed his discomfort with growing Tesla’s presence in AI and robotics without having 25% of the company’s voting power.
On Wednesday, Musk reiterated his stance from his previous tweet, but with some added clarification that shed light on his true intentions.
Musk emphasized, “I want to have enough to be influential. Like, if we could do a dual-class stock, that would be ideal. I’m not looking for additional economics. I just want to be an effective steward of very powerful technology.” He went on to explain that he chose the approximate 25% threshold not to gain complete control of the company, but to have a strong influence without going overboard. In fact, Musk acknowledged that if he were to become irrational or unfit for the role, the board could remove him. However, he still wanted enough influence to guide the company’s direction.
It is Musk’s mention of a dual-class stock that reveals his true intentions.
Dual-class shares are usually issued during an IPO to allow founders to retain voting control of the company. Examples of tech companies with controlling shares through dual-class stock include Meta Platforms Inc., controlled by co-founder Mark Zuckerberg, and Snap Inc., controlled by co-founders Evan Spiegel and Robert Murphy.
From 2017: Snap IPO boils down to one question, do you trust Evan Spiegel?
Musk’s Ambitious Vision for Tesla’s Future
Elon Musk, the CEO of Tesla, has recently sparked discussions about the possibility of implementing a dual-class stock structure for the company. While he mentioned his willingness to adopt such a structure in a tweet, he also acknowledged that it may be challenging to achieve post-IPO in Delaware.
Experts have weighed in on Musk’s intentions, and Stephen Diamond, an associate professor at Santa Clara University’s School of Law, believes that Musk’s interest in dual-class stock ultimately boils down to control. Diamond points out that it would be highly unusual to introduce a dual-class share structure years after an initial public offering (IPO), emphasizing that any significant changes of this nature would likely require shareholder approval.
Tesla, which went public in 2010 with Musk at the helm, currently sees him holding a 12.93% stake in the company. Over the years, Musk has had to sell billions of dollars’ worth of Tesla shares for various reasons. In 2022, he sold a significant portion of his stake to partially finance his acquisition of Twitter, and in late 2021, another sale helped cover a substantial tax bill.
It is plausible that these past transactions have left Musk somewhat regretful, and his recent comments may hint at a potential clash with Tesla’s board over his compensation. A $55 billion pay package, previously approved by the board, is currently subject to litigation following a legal challenge by shareholders. The outcome of this case, taking place in Delaware Chancery Court, is still pending.
However, it is crucial to recognize that Musk’s motives might extend beyond a desire for personal control. Musk has extensively voiced his strong opinions regarding artificial intelligence (AI) and its future implications. By raising this topic, he might be alluding to ongoing discussions at the board level about Tesla’s vision for AI and its integration into the company’s products, paralleling similar conversations that have taken place at OpenAI’s board.
As is typical with Elon Musk, the story does not end here. Investors eagerly await further developments to determine whether his aspirations for enhanced control over Tesla will materialize or remain mere speculation.