Tesla (TSLA) CEO Elon Musk warned Monday that he will need to secure greater control of Tesla if the company’s wide-reaching AI ambitions are going to be met.
“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,” Musk said from his X account on Monday night. “Unless that is the case, I would prefer to build products outside of Tesla.”
Musk went on to say that large asset custodians such as Fidelity and BlackRock own stakes in Tesla similar to his and asked: “Why don’t they show up for work?”
Musk’s odd comparison aside, Tesla does have ambitious AI goals, with the company using its Dojo supercomputer to train its AI model that powers its Full Self Driving (FSD) software, among other initiatives.
Wall Street analysts have argued Tesla’s AI and supercomputer products could be a success similar to Amazon’s AWS cloud services, which could be a huge non-automotive revenue generator for Tesla.
Musk used to have a much larger stake in Tesla but his widely criticized purchase of Twitter — now X — led to Musk selling a large quantity of Tesla stock to fund buying Twitter, diluting his Tesla stake to 13%, from around 22%. Wall Street initially reacted negatively to Musk’s tweet with the stock down over 2% in early trading on Tuesday; near 10:15 a.m. ET, however, shares had reversed and were up more than 1%.
Tesla stock has lost nearly $100 billion in market cap since the start of this year, and Musk’s foray into basically asking for more shares in new compensation, or changing direction on AI, is giving investors pause.
“It’s no secret and a key to our bullish thesis that all AI initiatives be kept within Tesla from Dojo to Optimus to FSD to various robotaxi and other robotic developments,” Wedbush analyst Dan Ives wrote in a note to investors.
“The Street views Tesla correctly (in our view) as a disruptive tech leader, and if Musk ultimately went down the path to create his own company (separate from Tesla) for his next generation AI projects this would clearly be a big negative for the Tesla story.”
Ives wrote a new compensation package for Musk has likely been held up while ongoing litigation over Musk’s prior compensation works its way through the courts. Shareholder plaintiffs argued Musk’s prior pay package was excessive and a waste of corporate resources.
The other big issue stemming from Musk’s ask for more shares is the negative outward appearance and perception of a CEO demanding more control of a company (and essentially more compensation), when he should have the best interests of shareholders in mind.
The Tesla board has also been criticized in the past for being too lenient with Musk and for being filled with Musk supporters, including his brother Kimbal Musk, and others who jointly invest in Musk’s other ventures including SpaceX.
“Dilution and shareholder approval is a process that must be carefully managed and this will not happen overnight,” Ives wrote, noting that he believes the drama over Musk’s latest demand will likely blow over.
Musk argued he would be fine with a dual class voting structure if it meant gaining more control, as opposed to more compensation, but he admits that changing the structure of Tesla’s stock classes is not possible given Delaware corporate law, which governs Tesla.
Other prominent Wall Street voices were more blunt, arguing Musk was out of his element.
“That’s not how corporate governance works,” Third Point founder and activist hedge fund manager Dan Loeb fired back in response to Musk on X.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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