Jan 16, 2024 - Business

Elon Musk threatens to pursue AI on his own without more control of Tesla

Photo illustration of Elon Musk stylized as a comic book character

Photo illustration: Sarah Grillo/Axios. Photo: Patrick Pleul/Pool via Getty Images

Elon Musk is threatening to pursue AI initiatives on his own if Tesla's board doesn't give him more stock in the company — and hence more control over its future.

Why it matters: AI is central to Tesla's market valuation — and without it, investors would likely see the stock as less valuable.

Driving the news: Musk said on X that he wants voting control over a quarter of Tesla's stock — which would be up from the 13% he currently holds.

  • "I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control," he said. "Enough to be influential, but not so much that I can't be overturned. Unless that is the case, I would prefer to build products outside of Tesla."

Context: The demand comes after his stake in the company, previously around 22%, was reduced when he offloaded shares to partially fund his $40 billion acquisition of Twitter.

  • It also comes as Musk awaits the outcome of a trial in Delaware over a shareholder lawsuit challenging his current compensation package as excessive.

What they're saying: "We view Musk's demands as posturing ahead of the Delaware court ruling," CFRA Research analyst Garrett Nelson tells Axios.

Keep in mind: Tesla investors naturally believe in Elon's leadership — but they also won't want their shares to be diluted.

  • And the company can't introduce a dual-class share structure, a la how the Ford family controls 40% of Ford Motor Co. despite owning a much smaller share of the company.
  • As a result, Musk is "likely to meet some pushback from the board and other shareholders," Nelson says.

Threat level: Tesla can't afford to fall behind on AI, which is central to its self-driving car technology, its supercomputing plans and its humanoid ambitions.

  • It's "key to our bullish thesis that all AI initiatives be kept within Tesla," Wedbush Securities analyst Dan Ives writes in a research note.

Quick take: The problem for Tesla is that Musk has a long-established track record of pursuing side projects, which suggests his threat may not be empty.

  • Last year he formed a startup, X.ai, to compete with ChatGPT creator OpenAI and other tech companies.

Yes, but: "We believe the Board and Musk will be able to resolve this issue over the next 3-6 months and ultimately all AI initiatives will be kept within Tesla," Ives concludes.

What to watch for: How the Delaware ruling affects Musk's blueprint.

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