On January 17, Beijing time, Elon Musk issued an ultimatum to Tesla. If he was not given more control, he would start a new business and stop developing artificial intelligence (AI) and robotics products at Tesla. On Monday local time, Musk suddenly said when interacting with netizens onUnless it meets my requirements, I'd rather develop products outside of Tesla."
Why is the largest shareholder still not satisfied?
Information from financial data provider FactSet shows that Musk currently holds about 13% of Tesla shares and is Tesla's largest shareholder. According to Tesla’s proxy filing in 2023,If he exercises all vested options, his stake would rise to approximately 20.6%.
Musk publicly threatens Tesla
Musk sold more than $39 billion of Tesla stock in 2021 and 2022, causing his holdings to slide, in part to help fund his $44 billion acquisition of X (formerly Twitter). However, the value of X has now plummeted.Fidelity Investments’ valuation shows that X is now worth less than one-third of what Musk acquired it.
"Musk is trying to regain the control he lost by selling Tesla stock to acquire Twitter,""We view Musk's request as a gesture ahead of a Delaware court ruling on his previous compensation package," said Garrett Nelson, an analyst at CFRA Research.
In 2018, Tesla's board of directors awarded Musk a compensation package worth more than $50 billion (approximately 360 billion yuan), and was sued by investor Richard Tornetta. Tornetta asked the court to revoke Musk's sky-high compensation. Musk said on Monday that he has not yet received a new compensation package because Tesla's board of directors is awaiting a verdict in a 2018 compensation case.
suspected of violating the law
Musk's threat to Tesla this time is also a big change in his attitude. Musk has long touted Tesla as an "AI/robotics company" with its semi-autonomous "Full Self-Driving" system and prototype humanoid robots.
Ann Lipton, a professor at Tulane University School of Law in the United States, pointed out that Musk’s problem is that as Tesla CEO and director, he not only refuses opportunities to make Tesla profitable based on his personal preferences, but also redirects these opportunities to his private company. "
"This is a conflict of interest and demonstrates a breach of his fiduciary duty to Tesla."Lipton said.
Musk shows off Optimus Prime humanoid robot
Some analysts also said that any move to move technology development outside of Tesla would only harm Tesla's stock price by eliminating potential growth opportunities.
Under a legal principle known as the "corporate opportunity doctrine,"CEOs and directors are prohibited from taking for themselves any business opportunities belonging to the company.
Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, said:"If he continues to privately develop the technology promoted by Tesla without Tesla's permission, it will be illegal."
The board of directors can't control it?
Tesla's board of directors has been criticized for not doing enough to rein in Musk, making it difficult to satisfy his wishes immediately or unconditionally. Ben Rose, president of equity research firm BattleResearch, believes that to meet Musk's demands, Tesla will have to issue new shares, which will dilute the value of existing shares without raising additional funds for Tesla and may trigger shareholder lawsuits.
Ross said Tesla's board could allocate stock options to Musk, which he would receive only if he reaches certain milestones in five years or more, like the sky-high compensation package he received in 2018.
Some experts believe thatMusk's new request will not be opposed by the board because he is important to Tesla,And he has a close relationship with several board members, including his brother Kimbal.
"In the past, the Tesla board of directors was generally tolerant of Musk's erratic behavior, so it is easier for Tesla to meet such requirements than other technology companies." said Xu Jiang (transliteration), associate professor at Duke University's Fuqua School of Business.
However, Xu Jiang pointed out,Musk may face strong opposition from major shareholders such as Vanguard Group and BlackRock.“My guess is that if board members have any objections, it will stem from their concerns about shareholder opposition,” he said.
JPMorgan analyst Ryan Brinkman said Musk's latest comments increase the possibility that he will step down as Tesla CEO. Tesla will likely grant him at least a certain number of shares, which would dilute investors' holdings. He added,Musk's public outburst may be an attempt to put pressure on Tesla's board of directors.
Some Tesla observers believe thatTesla has no choice but to appease Musk or risk harming the company's efforts to grow around AI and robotics.
"If he doesn't get what he wants, he's going to sit back and watch these businesses die. That's not in the best interest of investors," said Gene Munster, managing partner of Deepwater Asset Management.