Musk Demands Bigger Stake in Tesla as Price for A.I. Work | Hacker News Reader

Musk Demands Bigger Stake in Tesla as Price for A.I. Work

nytimes.com

The board should say 'no' and counter with stock options. Overall,Tesla would be much better off using that 12% stake to lure and retain engineering talent.

Musk starting work on AI at Tesla (which is already the case) and then intentionally forming a competitor elsewhere would be a huge conflict of interest and violation of his responsibility to Tesla. The one possibility where this may not apply is if he built out the AI group at SpaceX. But he'd still be in a situation where he is not acting in Tesla's best interest and , in fact, competing against Tesla.

Tesla's board could get rid of him, and sue, and win (and possibly claw back a lot of Musk's existing stake in the suit). That would be risky but also possibly a good course of action. At a minimum, it is a realistic threat that the board can use in deliberations.

The reality is that Musk probably has pretty good control of the board and will get something good out this... probably not 12%, but definitely not nothing.

> board should say 'no' and counter with stock options

Tesla's Board has eight members. One is Musk. Another is his brother. One is the CEO of Redwood Materials. Two are VCs.

It would take activist pressure to dethrone Musk. Tesla's sky-high valuation protects against that.

At what point do the board members start to become concerned with the prospect of Caremark personal liability?

> At what point do the board members start to become concerned with the prospect of Caremark personal liability?

Thank you for introducing me to this case [0], but when was the last related action after this?

My third-rate searching did not come up with anything.

[0] https://en.wikipedia.org/wiki/In_re_Caremark_International_I...

There was a big case a few years back where the directors of an ice cream company were found to be liable for not paying sufficiently close attention to food safety issues (Marchand v Barnhill). Since then, this type of claim - historically a tough one for plaintiffs to prevail on - has become increasingly popular. One was brought against the Solarwinds directors for the hack (the directors won) and another was brought against the Boeing board for the (first round of the) 737 Max debacle. I don’t know how that case turned out - I know the plaintiffs won an early procedural victory, and I assume Boeing settled, but in a quick search, I can’t find anything definitive on the current status of that case.

How much of his stake did he burn to buy twitter? Did Tesla get paid when its engineers were moonlighting at twitter? Musk has been promising self-driving cars next year for, what, a decade now? Wasn't that supposed to be his best effort at building out AI? Or is he now saying that he was just kidding that whole time and now he's suddenly serious? What a riot

So he’s extorting $83.5 billion to do his job …or else tank the value of all the snake oil he already sold the public?

The board should fire him immediately.

If they fire him, that will tank the value of the snake oil.

In the immediate term, yes. But there has to be some point at which an objective board would see that terminating their relationship with Musk would be a long term positive.

I’m not saying we’re there yet but it does feel like we’re marching towards it (I'm also not saying the Tesla board are objective because I doubt they are)

That point is when Tesla starts declining in absolute terms. And Tesla grew 35% in 2023. To be a long-term positive, dismissing Musk should produce even higher growth rates- which sounds extremely implausible. Conversely, the probability of Tesla falling into irrelevance in a future without Musk is extremely high.

If they fired Musk, he would wage a never-ending scorched earth campaign against Tesla, and as an executive he definitely has access to a lot of internal information that would allow him to inflict a ton of damage. At this point their only practical choice is to maintain the status quo by submitting to his demands.

This is so stupid but you’re probably correct. The board will do whatever he wants because that is the nature of having no collective spine. You cannot stand up.

He's not immortal. I assume that when there's a risk of him disappearing from the picture, Tesla investors will be heading for the lifeboats, tanking it in the process.

This is quite the threat… if Elon is not handed tens of billions of dollars there may never be an option for your Tesla to recite the fourteen words when you honk the horn

He demanded voting rights, not equity. That's an important distinction. I'm willing to bet a percentage of Tesla stockholders would be more than happy to have Musk have more control.

But it could be trivially met by just making his next options for super shares with 100x (made up ratio) the votes.

Delaware corporations cannot transition to a dual-class stock structure post-IPO.

Thank you. I was unaware of that. It still seems like there may be creative options that costs less than $86 billion.

If that's true, then it's just a plot to let Tesla's shareholders pay for his Twitter shenanigans?

This is exactly it, also a way to get out from under the Saudis.

Is that a statutory restriction (or an NYSE/NASDAQ rule?), or just the practical impossibility of getting a charter amendment?

https://archive.is/QdKY9

doesnt this put musk and shareholders at odds in either case? it demonstrates his primary concern is wealth, and not tesla's success. Seems like he just sees how big AI can be and having it tied to Tesla would limit his potential takeaway

Musk's play here seems to be:

1. I'm working on exicting new AI tech

2. Pay me to keep this tech under Tesla or else I'll stick it somewhere else.

Where this falls flat for me is that Musk is well known to over-promise and under-deliver (where are those fleets of self driving tesla's making passive income for thier owners through autonomous ride share??).

I think this is a ploy to regain a larger stake in Telsa after he sold off a bunch of his stock to buy Twitter. If he had some brilliant idea for AI tech then it wouldn't make a difference to him whether it was housed under Tesla or with another company he runs, as he would profit either way. But he probably knows the idea will probably not pan out and is trying to hedge that uncertainty by asking for shares of Tesla.

You mean those fleets that Musk claimed would have a 100% yield?

"Pay me for providing value to you or I won't provide that value to you"

I don't understand. What is he actually offering for the 12% stake? He doesn't actually personally do the work, right? So, he's asking for 12% to tell someone else to work on it? When they could just do the same thing without him? Am I missing something?

His ego.

the irony is that I'd trust Tesla robots way more if Musk was NOT involved

You're missing the fact that they can't. At least that's the claim. Could Apple have built the iPhone without Steve Jobs? Enough engineers were certainly there to build it, but it took him to make it happen. While Musk's bonafides are subject to debate, the fact is he's the person most central to this story, regardless of if he's personally the one holding the calipers and entering things into Solidworks.

Is the person who builds a house only just the carpenter that physically puts up the structure, or is it the person organizing and funding the whole effort?

Apple did build the iPhone without Steve Jobs...

He was in fact very much initially opposed to the iPhone, thought the money spent on its development was a huge waste of time and money. Jobs had to be convinced it would be a success by Scott Forstall and Jonny Ives.

TSLA is 700B in Mkt cap. How much will it be if Elon is fired/replaced? The diff is value he brings.

What value does he bring now? His attention seems to be mostly focused elsewhere anyway.

The main fear with letting him go has to be that it might start being valued like a car company, which would be very bad for shareholders even if it was good for the company to have a CEO that works at Tesla full-time

Why would you value it as a car company when it does other things, even without him?

I think for whatever reason he is the main reason people expect Teslas most ambitious things to succeed.

Also the first thing new CEO would do would be to reset expectations so they aren't blamed for not meeting the wildly optimistic timelines

The problem is that most of Tesla's market cap is hype, and the hype is tied specifically to Elon. Get rid of him and it becomes just another car company with a P/E to match.

> most of Tesla's market cap is hype, and the hype is tied specifically to Elon

What is the evidence for this?

On one hand, he drives retail interest in the stock. But that doesn't alone a $700bn company make. Tesla also has a $100bn revenue book that it turns as a profit thanks to its expertise and operational experience making batteries. To the extent batteries are to EVs what engines were to ICE vehicles, that puts it in a unique position in America and small company globally.

Between the cybertruck and Musk's fring politics, we may be approaching the point where his affiliation flips to liability. (A nested counterpoint being this resilience returning as evidence for his contributions.)

the cybertruck with all positive reviews and >million reservations? Im sure that will flip it yeah

> The diff is value he brings.

At this stage, I'd say Elon is a negative value for the company.

I've seen more than one Tesla with a bumper sticker that says something to the effect of "I bought this before I knew Elon was a twat".

People are tired of his lies about FSD. They hate Cybertruck (I don't believe the CT reservation numbers). They hate how he's gone full right-wing nutjob. They hate his handling of Twitter. Every time he opens his mouth (or tweets, really), it just creates more negative PR for himself, which then makes Tesla look worse.

I own a Tesla myself. I think kicking out Elon would be the best thing they can do for the company. Sure, his huge ego and personality gave Tesla a MASSIVE boost without needing any marketing, but it's no longer needed. Tesla is a household name at this point, and all the fame has gotten to his head.

Elon needs to go.

A lot of rules have been broken in Musk's relationship with shareholders, but this one is truly interesting.

He has shown that he can have some impact in robotics/AI (if you see the Tesla robotics work and Grok via X to be some indication) and wants to be heavily compensated for developing that tech within the Tesla umbrella (and thereby delivering additional value to Tesla shareholders).

I personally think it isn't worth the insane price tag as if he does become successful in those fields in say some separate company, he would still bring that value to Tesla in the form of favorable contracts etc. It just wouldn't be as big a smash homerun to have it all in-house. Regardless, Elon gets paid (through Tesla value going up or the other company making a profit) and shareholders see SOME growth just not all of it.

25% voting power != 25% TSLA stock as many are conflating.

That aside, "... or else I'll go buy competing product somewhere else" is classic Musk posturing.

Not sure if this is good or bad for the stock price.

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