Elon Musk is the founder and Chief Executive Officer (CEO) of Tesla, Inc. as well as another successful venture – Space Exploration Technologies Corporation better known as SpaceX. Musk holds a 20.8% stake in Tesla and a 22.7% voting rights. He has stated that the intent of his holdings is to maintain his influence on the company’s strategic direction and to keep the company from being taken over by external investors. To that end, Musk does not plan to sell his Tesla stock.
In April, 2020, Tesla shareholders approved a new compensation plan as proposed by Musk, which could make him one of the world’s wealthiest individuals. According to the plan, if Tesla reaches a market value of $650 billion over the next ten years and Musk meets certain performance milestones then he would have the right to purchase a significant stake in the company. In other words, depending on the success of Tesla in the coming years, Musk’s ownership in the company could significantly increase.
It is noteworthy that Musk has so far refused to take any of the money he made from the company while he is receiving a salary of only $1 per year. Over the past years, Musk has spent a significant amount of his own money to fund Tesla’s operation and related initiatives. He has done this as a sign of faith and commitment to both his own and Tesla’s investors.
Voting Rights held by Elon Musk
At the moment, Elon Musk holds 22.7% of Tesla’s voting rights. With that, Musk has the power to influence Tesla’s decisions and the company’s overall direction. To safeguard his influence and the company from external investors, an agreement between Tesla and Musk was made in 2017 that limits the amount of shares he can sell in any given year.
This agreement further stipulates that any investor looking to buy shares of Tesla must also be accepted by Musk himself and must agree to adhere to the same share-selling restrictions as Musk. This agreement was designed to keep Musk’s voting rights and influence over the company intact while also protecting Tesla from external investors or hostile takeover bids.
Musk also controls some voting rights through a special trust set up in his name. The trust holds 6.45 million Tesla shares and exercises voting rights over them. This trust is also signed off by a team of independent members of the board as mandated by Tesla’s legal advisors.
Tesla has two classes of common stock; Class A, which trades publically and has one voting right per share, and Class B stock, which is held privately and has ten voting rights per share. Musk is the primary holder of Class B shares which gives him a controlling share of voting rights compared to regular common stock. The bulk of Class B shares is held in a trust set up in Musk’s name and is managed by an independent board as per Tesla’s legal advisors.
However, despite being a significant stakeholder and holder of voting rights, Musk has relinquished his day-to-day responsibility of Tesla’s management to its current CEO, Zaib Razzaq. This move was made in order to free up Musk’s time to focus on his contributions to the automotive and space industries.
In April 2020, Elliot Management, an activist hedge fund, offered Tesla to buy back billions of dollars partly funded by the company’s own equity. Musk is likely to veto any such proposal as per the previously mentioned agreement between him and the company.
Elon Musk’s Influence over Tesla Decisions
Elon Musk’s impact on the company’s decisions have often been cited as a crucial reason for Tesla’s current success. His presence inspires a culture of “marching orders” among the company’s staff and empowers engineers and designers to quickly develop new projects. Head of the Autopilot division at Tesla, Andrej Karpathy, cites the “whirlwind of energy” gathered around Musk as one of the main driving forces behind Tesla’s success in VP Autonomous Systems.
Musk also pushes executives to take on ambitious projects which are often seen as risky by many. He spearheaded the development of Tesla’s Autopilot feature, which has made the company a major player in the autonomous car industry. As a result, Musk’s influence over Tesla’s decisions and projects is significant.
At the same time, Musk’s presence and influence over the company have not been without controversy. Some point to Musk’s tendency to make controversial statements as a concern while others point to the role of his holdings in potential anti-trust issues relating to the company’s operations.
Conclusion
In summary, Elon Musk holds a 20.8% stake in Tesla as well as 22.7% of the company’s voting rights. These holdings have allowed Musk to have significant influence over the company’s strategic direction and decisions. At the same time, Musk has also committed to keeping his stake in Tesla in order to protect it from external investors and prevent hostile takeover bids. Furthermore, Musk’s influence over the company is further highlighted by his commitment to the projects he spearheads and his leadership of the company’s engineers and designers. However, his influence is not without controversy, with some pointing to his tendency to make controversial statements as a source of concern.
