Elon Musk's demand for more Tesla control could weigh on the stock, analysts say

Published Wed, Jan 17 20249:59 AM ESTUpdated Wed, Jan 17 202411:38 AM EST

Elon Musk's apparent ultimatum to Tesla 's board of directors to acquire more control of the automaker could negatively weigh on its stock, analysts say. Musk posted on his social media platform X, formerly known as Twitter, on Monday that he was uncomfortable turning Tesla into an artificial intelligence and robotics leader without having 25% control of the company. "Unless that is the case, I would prefer to build products outside of Tesla," Musk wrote . Musk previously controlled about 25% of Tesla before selling shares in 2022 to fund his purchase of Twitter, according to JPMorgan analyst Ryan Brinkman. He currently controls about 13% of Tesla. Regaining 25% control of the automaker would require "the effective dilution of other investors stakes, likely via the arrangement of a new compensation plan," Brinkman told clients in a Tuesday research note. Musk's demand will weigh on shares because it raises the odds that he will depart as CEO if he doesn't get his way, and raises the cost to shareholders of keeping him on board, Brinkman wrote. Musk's demand also "raises the risk of near-term de-rating and further volatility" because Tesla's valuation multiples are already factoring in significant upside from nonauto activities, Jefferies analyst Philippe Houchois told clients in a Tuesday research note. Investors will likely start to question Musk's recent track record at Tesla, Houchois wrote. They will question Musk's dilution of Tesla shareholders to fund the Twitter acquisition and his questionable strategic and product priorities over the past two years that have undermined growth, returns and management cohesion, according to Houchois. Investors may also question corporate governance at Tesla given that they are learning about the compensation issues from Musk on social media, Brinkman wrote. Nevertheless, Jeffries expects Tesla's board will approve another CEO supercompensation scheme to keep AI developments within the Tesla fold, Houchois wrote. Jeffries currently has a hold rating on Tesla's stock with a price target of $225, implying 2.3% upside from Tuesday's close of $219.91. JPMorgan has an underweight rating on Tesla with a price target of $135, implying significant downside of 38% from yesterday's close.