Musk Is Holding Tesla To Ransom (Again)
Musk Is Holding Tesla To Ransom (Again)
Greed and hubris are dangerous things.
Musk has reaffirmed he wants to hold Tesla’s feet to the fire to get more from it. You see, a few months ago, Musk tweeted that he felt “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. Unless that is the case, I would prefer to build products outside of Tesla.” Musk has gone on record multiple times, stating that Tesla is worthless without its AI products. What’s more, Musk took Tesla public with only one class of shares, and after having sold billions worth of Tesla stocks over the years, he now only has a 13% stake compared to his 22% stake in 2014. This means that the only way to give Musk his 25% voting control is to give him $81 billion worth of Tesla shares, or he will tank the company. Since then, we haven’t heard any more of Musk’s plan to ransom Tesla investors. That is, until recently.
But let’s quickly qualify what Musk is doing here. Not only has Musk repeatedly claimed that Tesla is an AI and robotics company that is worth nothing without self-driving, but he has actively made this the case in recent months. Musk has scrapped the highly anticipated affordable Model 2 in favour of a self-driving robotaxi, despite the fact that Teslas still can’t fully drive themselves safely or legally. He fired Tesla’s head of battery development, disbanded the entire supercharger team, and even halted the development of their gigacasting technology, which promised to make Tesla even cheaper to produce. As such, the only way for Tesla to increase its profits and grow its business is to expand its AI services, as Musk has sabotaged its growth in manufacturing.
Well, a post on X by Teslaconomics recently circulated, which said that “If Elon gets 25% voting power, Tesla is reincorporated in Texas, and compensation package is approved, then AI & Robotics stays within Tesla and the company can march on forward to become the largest company in the world.” Musk replied to the post with a simple “Yes.”
While this seems like an insignificant little tweet, it suggests Musk’s previous threat still stands. The timing of this is also suspicious. As noted in the post, Musk’s insane $56 billion compensation package is set to be voted on by shareholders on June 13th. If approved, Musk will be granted these funds through stock options, raising his stake in the company to 18%.
With all of this in mind, this threat suddenly becomes more sinister. It’s effectively saying you better approve the compensation package, or I’m coming for it any other way. It also heavily suggests the compensation package doesn’t go far enough and that Musk will come back for even more, even though he would have that ~25% voting control if he hadn’t sold billions in Tesla stocks over the years to fund inane projects like buying Twitter.
But, Tesla shareholders are already revolting against Musk’s compensation package, and there is a growing chorus of angry investors, including individuals and institutions alike, furious at his manic, egotistical and erratic leadership. They feel uncomfortable with him leading Tesla’s AI projects. After all, there are now numerous whistleblowers and leaks from engineers that Musk has overruled engineers’ advice and actively made autopilot and FSD less safe (read more here), so you can’t blame them. What’s more, you might not have noticed, but Tesla is far from a leader in AI, having recently had to slice the price of its FSD service in half to get people to buy it. Betting the farm on such a poorly selling product is utterly mental. I can’t help but feel Musk is embracing his inner Zapp Brannigan, piloting his ship directly at a black hole, and demanding everyone praise and reimburse him for the pleasure.
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Sources: Electrek, Planet Earth & Beyond, Bloomberg, IBD, Will Lockett