Elon Musk wants voting control of Tesla’s stock, but he won’t admit it to investors

Elon Musk is being disingenuous to investors when he tells them that he does not really want voting control of Tesla Inc.

In Tesla’s

earnings conference call on Wednesday, after the electric-vehicle maker warned of slower growth next year, Musk was asked by an investor if retail shareholders be concerned about his recent comments about voting control. Earlier this month on X, formerly Twitter, Musk said he is uncomfortable growing Tesla as a leader in AI and robotics if he doesn’t have 25% of the company’s voting power.

On Wednesday, Musk repeated a bit of what he said in his earlier tweet, with some amplification that showed his true state of mind on the topic.

“I want to have enough to be influential. Like, if we could do a dual-class stock, that would be ideal,” Musk said. “I’m not looking for additional economics. I just want to be an effective steward of very powerful technology. And the reason I just sort of roughly picked approximately 25% was that that’s not so much that I can control the company even if I go bonkers. And if I’m mad, they can throw me out. But it’s enough that I have a strong influence. That’s what I’m aiming for, is a strong influence but not control. If there’s some way to achieve that, that would be great.”

But his reference to wanting a dual-class stock is where Musk gives himself away.

Dual-class shares, as many tech investors already know, are issued so that the founders keep voting control of the company, typically at the time of its IPO. Two recent examples of founders with controlling shares, via dual-class stock, are Meta Platforms Inc.
which is controlled by co-founder Mark Zuckerberg, and Snapchat parent Snap Inc.
which is controlled by co-founders Evan Spiegel and Robert Murphy.

From 2017: Snap IPO boils down to one question, do you trust Evan Spiegel?

Musk even admitted in later comments on the same tweet that he had looking into the possibility of a dual-class structure. He tweeted that he “would be fine with a dual class voting structure to achieve this, but am told it is impossible to achieve post-IPO in Delaware.”

“He’s trying to soft-pedal the reality that dual-class stock is all about control,” said Stephen Diamond, an associate professor at Santa Clara University’s School of Law, in an email. Diamond said it would be highly unusual to put a dual-class share structure in place, years after an IPO, and that he has never seen it done before. “Any change like this will likely require shareholder approval (not including Musk’s shares).”

Tesla went public in 2010 with Musk as CEO. Currently, he owns 12.93% of Tesla’s shares, according to FactSet. In 2022, Musk had to sell billions of dollars worth of Tesla shares to partially fund his purchase of Twitter. In late 2021, he sold about $16 billion in shares to pay a tax bill, which was about 10% of his stake in Tesla at the time.

Musk could be having a bit of remorse that he had to sell his shares in the past, and his comments may be pointing to some sort of showdown with Tesla’s board over his compensation. Currently, his $55 billion pay package that was approved by Tesla’s board is still in litigation after a shareholder lawsuit challenged it, and is awaiting a ruling on the case in Delaware Chancery Court.

But Musk is also being disingenuous about what he really wants. AI is a loaded technology and Musk has very strong opinions about its future. His bringing up this topic could also be indicative of some discussions at the board level about Tesla’s vision of the future of AI and its usage in its products, as happened on the board of OpenAI last November.

As with everything that involves Musk, there is always more to come. Investors will clearly be waiting to see if Musk’s hopes for more control of Tesla amount to anything more than a pipe dream.

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