Musk demands bigger stake in Tesla as price for AI work

Musk demands bigger stake in Tesla as price for AI work

Tesla Chief Executive Elon Musk stunned investors by demanding that the company’s board give him more than $80 billion worth of shares if it wants him to continue developing products based on artificial intelligence.

In the latest display of his disregard for traditional ways of communicating with investors, Mr Musk said late on Monday on his proprietary social media site is required. Because it develops robots and other artificial intelligence technologies.

Mr Musk said if his demands were not met, he would pursue unspecified ventures outside Tesla. In addition to electric cars, Tesla is developing a humanoid robot called Optimus, and using artificial intelligence to develop self-driving technology, a cornerstone of the company’s strategy. Those businesses belong to Tesla, and Mr. Musk could not easily walk away from them.

The company’s stock market valuation of nearly $700 billion – more than twice that of Toyota Motor, the world’s largest automaker by annual car sales – is based on investors’ belief that the company will outpace the rest of the industry in car development. Will lead. Can drive from one place to another without human intervention. Investors are also betting that advanced automation will allow Tesla to build cars more efficiently and profitably than rivals.

Mr Musk owns 13 percent of Tesla, which he has renamed X, after selling a large portion of his stake to finance its $44 billion acquisition of Twitter. The social media site has struggled under his leadership and declined in value. An additional 12 percent of Tesla would be worth $83 billion at the current share price, effectively offsetting Mr Musk’s investment in Twitter – which he has said he regrets – and then some.

“I am uncomfortable making Tesla a leader in AI and robotics without ~25% voting control,” Mr Musk wrote on X. Enough to be impressive, but not so much that I can’t be turned upside down.

He added: “Until that happens, I would love to make products outside of Tesla.” But he also said the board would not take any action until a Delaware judge rules in a lawsuit brought by a Tesla shareholder challenging an earlier compensation plan that helped make Mr Musk the world’s richest man. .

Mr Musk is scheduled to testify in the Delaware case in late 2022. Gregory Varallo, who represents shareholders in the lawsuit, said he did not know when a decision would be reached. No documents have been filed in the case since July.

Tesla did not respond to a request for comment.

Mr Musk’s demands underlined the extent to which Tesla, which sold 1.8 million vehicles last year, is subject to his impulses.

“When you come back to the office after a three-day weekend you’re not really sure what you’re going to read from Elon Musk,” said Ben Rose, president of Battle Road Research, which advises institutional investors. Mr Rose called Mr Musk’s demand “curious and ill-timed”, noting that Tesla faces increasing competition and tough economic conditions.

Tesla’s success under Mr Musk has forced traditional carmakers to start offering electric vehicles, which are needed to reduce greenhouse gas emissions from transportation. But Mr Musk’s behavior and statements have weighed on the stock price and landed him in trouble with regulators.

Tesla shares fell after Mr Musk sold some of his stake to buy Twitter. Shares also suffered when Mr Musk said in 2018 that he had the money to take Tesla private and delist it from the stock exchange. Mr Musk was unable to execute the plan. The private statements led to a lawsuit by the Securities and Exchange Commission, which Tesla settled for $40 million, while agreeing that lawyers would screen what Mr Musk said on Twitter. It was not clear whether Mr Musk’s statement, delivered late on Monday at X, was approved by lawyers.

It will be difficult for Tesla’s board, which has been criticized for not doing enough to control Mr Musk, to carry out his wishes immediately or unconditionally. The company will have to issue new shares, Mr. Rose of Battelle Research said. This would dilute the value of existing shares without Tesla raising additional capital, and could lead to shareholder lawsuits.

But Mr. Rose said the board could hand Mr. Musk stock options that he would receive only if he achieves certain milestones over five years or more. This would be similar to the compensation package Mr Musk received in 2018 that was contingent on Tesla reaching a stock market valuation considered unrealistically ambitious at the time. By defying expectations and hitting targets, Mr Musk became the richest man in the world.

The company’s stock has fallen about 11 percent so far this year but is up nearly 70 percent in the last 12 months.

Mr Musk did not specify what products he might develop outside the company. He has already started a separate artificial intelligence business called X.AI, which released the Grok chatbot to selected users last year, though he has also highlighted the dangers of the technology in public comments.

Tesla’s main use of artificial intelligence has come in its Autopilot and Full Self Driving systems, which assist drivers by taking over certain tasks in certain driving situations. Mr Musk has said several times over the past few years that the company is close to perfecting the technology that would allow a car to completely drive itself. But self-driving technology has taken longer to perfect than Mr Musk’s predictions, and many experts believe it is still years away.

The carmaker is also working on a robot called Optimus. The device can fold a shirt, but it hasn’t become a significant source of revenue, according to a video Tesla posted on X on Monday.

At the exchange, some of Mr Musk’s fans applauded his demand for a 25 per cent stake, saying he had earned it. But others said it was their own fault that their stake in the company had fallen. “They didn’t force you to sell your shares,” one user wrote, adding, “Why should the board do anything to improve this for you?”

Having less than a 15 percent stake in the company, Mr. Musk said, “makes it very easy for a takeover by questionable interests.”

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