In a post on X.com, owner of X.com and Tesla CEO Elon Musk (TSLA), claimed he was "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." Musk currently owns 13% of Tesla, with his brother, Kimbal Musk, also sitting on the board of directors. Musk is currently in a battle over whether a previous compensation package was excessive, pending a court ruling from a Delaware Chancery Court.
Ross Gerber, Gerber Kawasaki Wealth & Investment Management CEO & President, joins Yahoo Finance to give his insight into Elon Musk's potential move to have even more sway over Tesla.
When asked about Elon's move for more control Gerber exclaims: "The index funds owns 30% of Tesla. They don't vote anything. Elon owns 13%. You see what I'm saying? There's nobody that can take control of Tesla. There's nobody. You would need hundreds and hundreds of billions of dollars of cash to buy the stock. So, the notion that he doesn't control Tesla-- Tesla's the closest thing to a private company that's a public company. Okay? It's not run like regular public companies. Come on."
Related Videos
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
JOSH LIPTON: Tesla's CEO, Elon Musk, threatening he needs more control of Tesla if the company's AI ambitions are going to be met. Tweeting today, he said, 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. Let's see how investors are taking this news. Ross Gerber, CEO and President of Gerber Kawasaki Wealth and Investment Management, joins us now. Ross, it is always good to see you. So let me get your take on this, Ross. Elon Musk is taking this fight public. What do you think?
ROSS GERBER: I think he should buy the stock. I think he should use his money and buy 3% of Tesla for $25 or $30 billion, like the rest of us. I think the idea that shareholders should just give him $30 billion of stock so that he'll do his actual fiduciary duty to the company, which is building the AI and robotics company he sold us all on.
Like, I'm very confused by all this. His job as CEO is actually to build this AI-robotics Tesla company that he's being paid already $50 billion to do. So I don't know. I think this is absurd. Elon's friends and relatives are on the board of directors of Tesla. Nobody has any influence over Tesla except Elon. And so, I don't know what he's talking about.
MADISON MILLS: Ross, tell us how you really feel. No. And great to talk with you, by the way. It's Madison.
ROSS GERBER: Hi.
MADISON MILLS: I'm curious. What is this really about? Is this about this philosophical AI? What is that going to do for our society? Or is it about more control of the company? Or is it about a salary issue? What is this about here?
ROSS GERBER: Well, when you have $200 billion and you don't even care about living in a regular house and sleeping in a regular bed, it's not about money, OK? So this is about the fact that I tweeted that Grok is not owned by Tesla. And to put Gronk or whatever this thing is called on Tesla is a conflict of interest, and that Tesla should have an LLM model already on their cars. Because if you talk to your Tesla, it's like worse than Siri.
So, like, the fact that I can already talk to my computer through chat and Microsoft products and have an incredible AI assistant already with Microsoft products, but Tesla hasn't put anything on the car, I should be able to talk to my Tesla and tell her what to do right now, is a total failure not only in the board and making sure that Tesla is focused on Tesla, but the CEO of Tesla is actually focused on Tesla. So to me, this is really troubling.
JOSH LIPTON: And Ross, I'm just interested in this, kind of-- listen, this threat that Musk is basically making here, he's saying, listen, give me 25% voting control, or I may take my AI and robotics products someplace else. You're in Tesla, how much of a risk really do you see that?
ROSS GERBER: Well, I see this as a fundamental change in the story of Tesla. And it started two years ago. It's taken me about a year to fully grasp the fundamental change in the story in Tesla. But now, it's been solidified exactly what I feared, which is Elon has full control of xAI, and he wants to build his products and services under his full control and not for Tesla shareholders. Even though he owns and controls the company, I think he wants to own 100% of this.
So it's just so many conflicts of interest that's never existed in business history. And I think shareholders of Tesla, which I am one, have to consider this in their valuation and in their modeling of where this should be in your portfolio, which we have. And you can see that in my fund, GK, that Tesla's not only dropped in its weighting overall because it's underperformed, but also we've cut our position back in our fund over the last several months, as you've seen.
MADISON MILLS: Ross, from the perspective of retail investors specifically, is more control for Elon Musk at Tesla bullish or bearish?
ROSS GERBER: Hold on. What do you mean by more control? OK, nobody controls Tesla but Elon. The board is his brother and his friends.
MADISON MILLS: But in terms of the voting, Josh, that he's talking about.
ROSS GERBER: Listen, index funds own 30% of Tesla. They don't vote anything. Elon owns 13%, OK. You see what I'm saying? Like, there's nobody that can take control of Tesla. There's nobody. You would need hundreds and hundreds of billions of dollars of cash to buy the stock. So the notion that he doesn't control Tesla, Tesla's the closest thing to a private company that's a public company, OK? It's not run like regular public companies. Come on.
I mean, it's just, this whole thing is-- we've entered this reality distortion effect like 5x now. And it's just-- the X/Twitter world is not the real world. And that's the world Elon lives in. And it's just not the world the rest of us live in. And so, I think we're just seeing this full-fledged.
JOSH LIPTON: And Ross, you mentioned, listen, you're still in Tesla stock. You might have trimmed, but you're still in there. Looking ahead now in 2024, what are the catalysts, as a Tesla investor roster looking forward, that you think can move this stock higher?
ROSS GERBER: So it's all about earnings for me. Like it doesn't matter what stock you have, if earnings aren't going up, it's very hard for a stock to go up. And especially one with a 60 forward price earnings. So earnings have to go up. And earnings estimates continue to go down as they discount car prices. And now we're at 375 a share for this year. So you can see that this has been a massive decline in the earnings potential of the company.
So I think the question is, what will help them beat these estimates. And obviously, the best thing would be is if they could hold pricing on the cars constant, and margins wouldn't continue to shrink, and volumes would increase, that would be bullish. And if they are able to launch and really like ramp the Cybertruck, which I fear is going to be much more difficult and expensive than they assume, so if we can get Cybertruck out in real volumes and keep pricing on the Model Y constant, Tesla has some upside.
But I think, right now, Tesla is a mature company looking at a lot of challenges looking front of them with an unfocused CEO. And I think, at its current multiple, represents a certain level of risk in the stock that didn't exist before. And I think investors should pay heed and look at their portfolio. I love the company and I love Tesla's mission, but I also have to look at the reality of the challenges the company faces.
MADISON MILLS: So talk to me about those challenges, Ross? What's the single biggest one you anticipate for this year?
ROSS GERBER: Well, the single biggest one I see is really around full self-driving, the fact that it still doesn't work. And year-after-year, this is supposed to happen. When you think about technology and AI, it's an AI application, that car can drive itself, that's what they've been promising. They call it full self-driving, and the fact that we're not-- still on version 12 or some version that's completed, it's a risk for Tesla long-term. Like, what happens if they can't-- like it's plateaued? They can't get better from where they are today.
And so I think that's a big risk for the company. Other than that, I think Tesla needs to advertise, and they need-- it needs to move away from the identity of Elon Musk to really defining its own identity and developing new demand from new customers, because 90% of people still don't own an EV and probably would want one. So we need to address those markets. So Tesla has some challenges, but it also has a lot of potential upside if the company is managed correctly.