Tesla shares fell on Tuesday, extending their year-to-date decline to around 28%, as investors continue to grapple with a key long-term risk tied to CEO Elon Musk's ambitions in artificial intelligence technologies.
tesla (TSLA) Shares have lost nearly $230 billion in value this year as the electric vehicle maker faces headwinds related to declining demand for electric vehicles, higher interest rates, supply chain disruptions and a dearth of new model launches.
A broader risk to the group's long-term prospects has also emerged this year, tied to the fate of a disputed $55.8 billion pay deal that Musk and Tesla's board negotiated in 2018.
Delaware Court of Chancery Judge Kathaleen McCormick rejected the package last year, calling it an “unfathomable sum.” But Tesla continues to push for approval in the courts, while Musk has taken steps to reincorporate the company into the friendlier regulatory confines of Texas.
Shareholders will vote on the package for a second time on June 13, as the board looks to bolster its appeal in Delaware. But with stocks plummeting and Musk distracted by his myriad interests beyond Tesla, the chances of him receiving support are starting to diminish.
In fact, shareholder proxy service Glass Lewis issued a report on May 26 urging shareholders to reject the proposal, citing its “excessive” size, its dilutive effects on the share count and the “list of projects consuming extraordinarily long” and that continue to demand Musk's participation. attention.
Musk to investors: Pay me or…?
Glass Lewis also advised shareholders to reject Musk's plans to incorporate Tesla in Texas, arguing it offers “uncertain benefits and additional risks.”
The boost to Musk's pay deal comes at a crucial time for the group, as Tesla has tested investors' patience with plans to shift its focus from its traditional car-making roots to developing a fleet of autonomous robotaxis. , which Musk has promised to present for the first time. this summer.
Musk has long maintained that Tesla's ultimate destiny lies in the use of advanced artificial intelligence technologies, which will power the group's self-driving software. And he has said that he needs broader control of the group for that to happen.
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“I feel uncomfortable making Tesla the leader in artificial intelligence and robotics without having roughly 25% voting control,” Musk said earlier this year. “Enough to be influential, but not so much that they can't overthrow me.”
“Unless that's the case, I would prefer to build products outside of Tesla,” he warned.
Musk currently owns about 13% of Tesla following a series of major stock sales to finance the $44 billion purchase of social media website x in 2022.
In a move seen by some as a blow to shareholders, Musk's artificial intelligence startup xAI said it had raised a new round of capital on May 26. The round was backed by venture capital investors Andreessen Horowitz and Sequoia Capital.
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Join xAI if you believe in our mission to understand the universe, which requires the pursuit of truth with the utmost rigor, regardless of popularity or political correctness. https://t.co/jWEGDDnVk1
– Elon Musk (@elonmusk) twitter.com/elonmusk/status/1794981927125987683?ref_src=twsrc%5Etfw”>May 27, 2024
The $6 billion infusion, which came as part of a Series B funding round, could value xAI at up to $24 billion and accelerate the group's push to challenge market leaders like Open ai's ChatGPT .
Enter the DoJo with Musk
However, XAI is not Musk's only foray into the world of ai. Tesla has continued to develop the DoJo supercomputer as part of the group's effort to realize its autonomous driving ambitions and boost its nascent robotaxi fleet.
“The thinking at Tesla is almost exclusively in terms of solving for autonomy and being able to activate that autonomy for a gigantic fleet,” Musk told investors in April. “And I think it could be the biggest asset value appreciation in history when the day comes when you can drive completely autonomously and without supervision.”
Morgan Stanley analyst Adam Jonas says DoJo could add more than $500 million to Tesla's market value while boosting the prospects of its fully autonomous driving system, broader network and mobility services. , as well as its batteries, energy and insurance divisions.
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Gene Munster, an analyst at Deepwater Asset Management and a longtime Tesla advocate, says the licensing of self-driving technology could generate up to $20 billion in annual revenue within five years of the first deal.
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But several analysts say all of those gains are tied to Musk's continued commitment to the group and his ability to extract cheaper capital and a fair compensation package. The weekend's move to add some early adopters to xAI could test that thesis in the coming months.
Tesla shares fell 1% in premarket trading, indicating an opening price of $177.48 each.
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