If Tesla (TSLA) becomes a behemoth in the AI space, as CEO Elon Musk envisions, there is a risk that activist shareholders could take control of the company and steer it in the wrong direction. It's too big, he argues.
In the latest effort to seek greater influence over company decisions, Musk said on an earnings call Wednesday that he has created a new class of employees that will allow him to be “an effective steward of very powerful technology.” He reiterated his support for the creation of super-voting stocks.
Musk said unless he wields greater influence through voting, activists at major shareholder advisory firms could eventually oust him or steer Tesla down the wrong path. .
I was completely wrong in expecting Musk and his team to stand up like the adults in the room and give us a strategic and financial overview of ongoing price cuts, margin structures, and demand fluctuations. was. Instead, I got the gist at another trainwreck conference. For street use. PT ~ $315
— Dan Ives (@DivesTech) January 25, 2024
“What I'm aiming for is a lot of influence, but not control,” he said, adding that his desire to take a 25% stake in the company gives him the right amount of power, but also gives him the ability to He explained that this would leave room for others to challenge the decision. Person concerned.
“I want to have enough leverage. For example, if I can create dual-class shares, that would be ideal,” he said. It's a very powerful technique. ”
Musk's request comes at a difficult time for Tesla. The company's fourth-quarter results were below expectations, and its full-year production outlook was also lower, causing its stock price to plummet. Even some Tesla bulls expressed disappointment following the latest earnings report.
“We were hoping that Musk and his team would stand up like adults on a conference call and give us a strategic and financial overview of ongoing price cuts, margin structures, and fluctuating demand. was completely wrong. Instead, we got a high-level Tesla. We'll do the long-term outlook in another trainwreck conference call,” said Wedbush's Analyst, led by Dan Ives. List et al. said in a memo Thursday.
Instead of the one-vote-one-share dynamic, the dual-class structure that Musk wants would require super-voting shares that count more votes, leaving the company diluting everyone else's stake. rather than allowing its owners to have more influence over the company's decisions.
However, the creation of a multi-class share structure typically requires shareholder approval. If a company's founders or early investors own a majority of the shares and want a dual-class arrangement, they can vote to allow it to continue. But in Mr. Musk's case, this would require shareholders to essentially give up their voting rights in order to empower an impulsive and stubborn management team that already has He has faced criticism for acting against the company's interests in favor of whims and other business endeavors.
It's not an impossible scenario. But that's unlikely.
Tesla could also give Musk the level of influence he desires by simply giving away additional shares. But that would dilute ownership for existing shareholders and invite further criticism that the board is too deferential to Musk without reining in his power.
The additional stock would represent a huge pay raise for Musk. Tesla is already embroiled in a lawsuit stemming from his 2018 compensation package, which could total more than $50 billion. The shareholder lawsuit alleged that the pay plan amounted to corporate waste and unjust enrichment, and that board members breached their fiduciary duties by approving the package.
Shares fell nearly 10% on Thursday.
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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