Legendary shortseller Jim Chanos has criticised Elon Musk's attempt to gain more control of Tesla and called out the billionaire for threatening the automotive company's progress unless his voting rights are doubled.
Last year, Chanos, who is one of Wall Street's best-known bears, made headlines when he told his backers that has decided to close his main short-focused hedge funds after more than three decades. Chanos is also known for exposing the Enron scandal in 2001 and for betting against Wirecard. Moreover, he has a reputation for spotting fraud.
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.
— Elon Musk (@elonmusk) January 15, 2024
Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand…
Investors were taken aback when Musk demanded that the Tesla board give him a bigger stake in the (electric vehicle) EV manufacturing company. Musk wants shares worth more than $80 billion (about £63.07 billion), which he plans to use to further develop AI-powered products, according to a New York Times report.
To those unaware, Tesla has been working on a humanoid robot called Optimus. Moreover, the company uses AI to develop self-driving technology. NYT points out that Musk could simply walk away with these businesses, which belong to Tesla.
Musk went on to say that he would prefer building AI and robotics products outside Tesla unless his voting power is raised from 13 per cent to around 25 per cent. In other words, he is threatening to leave Tesla.
This doesn't come as a surprise given that he has previously admitted that he likes focusing more on product development and technology than being a corporate leader.
I never wanted to be CEO – just wanted to work on product/technology. Bill Harris sounded like he would be a great CEO, given his Intuit experience, but he was not.
— Elon Musk (@elonmusk) June 2, 2022
Running companies hurts my heart, but I don’t see any other way to bring technology & design to fruition.
Musk believes having more authority in decision-making would ensure he is safe from interlopers. He also noted that Fidelity and other providers of index funds and mutual funds own similar stakes as him but do not show up for work like he does.
However, he added that the "Tesla board is great". Musk said there's no new compensation plan because they are still waiting for a decision in his Delaware compensation case. Although the trial for the case was held in 2022, a verdict hasn't been made yet.
A few other products coming too https://t.co/4Tv3tAOEPo
— Elon Musk (@elonmusk) January 5, 2024
Earlier this month, Musk also indicated Tesla is gearing up to launch "other products" in response to an X (formerly Twitter) post about the products and services developed by Tesla.
Elon Musk gets called out for his impractical demand
While it is still unclear what's brewing in the Tesla garage, veteran short seller Jim Chanos has accused Musk of being unreasonable and obtuse for suggesting his equity stake isn't enough to motivate him in an X post.
Let me get this straight…Elon wants another 450M new shares($100B)or conversion of existing shares into super-voting status, or he will “prefer to build products outside of Tesla”?! I know this is Elon, but you do realize how outrageous this is, right? What say you, $TSLA board? pic.twitter.com/zGFVTNzP8g
— Diogenes (@WallStCynic) January 16, 2024
"Let me get this straight...Elon wants another 450M new shares ($100B) or conversion of existing shares into super-voting status, or he will 'prefer to build products outside of Tesla?!'" Chanos posted on X. He even described this demand as "outrageous".
Aside from suggesting Musk is holding Tesla hostage by delaying the development of new products, Chanos said: "Does he really not understand how index/mutual funds work...?!"
Does he really not understand how index/mutual funds work…?! https://t.co/karf0if5Lz
— Diogenes (@WallStCynic) January 15, 2024
The renowned shortseller believes "when it comes to Tesla, he's (Musk) the narrative". He described Tesla as the "it girl" of this market cycle with a stock built on "hopes and dreams".
