Why Tesla CEO is voicing 25% voting control and what’s his compensation trial?

Tesla and SpaceX CEO, Elon Musk on Monday expressed himself of having a 25% voting control over the electric vehicle (EV) company.

Currently, Musk has about 13% of Tesla or 411 million shares from the total 3.19 billion Tesla shares in common stock outstanding based on the financial filing for Q3 of 2023.

A big amount of his share was spent during his large deal of $44 billion to buy the social media site Twitter, now renamed “X”. But he is now voicing more control over Tesla with a few given reasons.

“I am 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.” Musk wrote on X.

“Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand that Tesla is not one startup, but a dozen. Simply look at the delta between what Tesla does and GM.” he added “As for stock ownership itself being enough motivation, Fidelity and others own similar stakes to me. Why don’t they show up for work?”

These comments could reflect different angles about his stake at Tesla and the products that the company growing alongside EVs including AI and Robotics.

To recall, Tesla CEO, in 2022, predicted that Optimus robot. He “ultimately will be worth more than the car business and worth more than full self-driving”.

A prototype of the Optimus robot made its debut in September 2022 to show the growing foothold of Tesla in other businesses.

Although, Tesla has a vast market share in the electric vehicles industry and has been the key source of revenue since the very beginning but its CEO is now promoting the firm as an “AI/Robotics company”.

Earlier this month, while being compared to Chinese EV giant BYD, Musk mentioned that “Tesla is an AI/robotics company that appears to many to be a car company”. This statement was made after BYD surpassed Tesla in overall global EV sales for the past year.

Tesla makes its 95% of revenue from the “car” business according to a company filing from 2022. In its third quarter 2023 financial filing, the company announced its future business interest focused on AI, robotics, and automation.

“If I have 25%, it means I am influential, but can be overridden if twice as many shareholders vote against me vs for me. At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy.” Musk further explained his stand about 25% voting control.

He also suggested a dual-class voting structure “I would be fine with a dual class voting structure to achieve this, but am told it is impossible to achieve post-IPO in Delaware.”

Musk’s new comment on owning an increased stake at Tesla could raise some discussion among the board of directors. However, he publically denied any feud with the board itself.

Delaware Trial:

This conversation of seeking more control and the board of directors cannot move further without mentioning the Delaware trial.

In 2018, a shareholder sued Tesla and its CEO for awarding a potential compensation package worth over $55 billion to Elon Musk. The shareholder argued that the package was excessive and a result of Musk’s major influence over the board.

This trial was concluded in November 2023 but a decision is still pending from the Court of Chancery. Furthermore, this case is pivotal for Musk to get any further compensation package from the Tesla board.

“The reason for no new “compensation plan” is that we are still waiting for a decision in my Delaware compensation case. The trial for that was held in 2022, but a verdict has yet to be made.” he wrote on X.