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Column: Elon Musk thinks Tesla's investors love him. He's very wrong

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Column: Elon Musk thinks Tesla's investors love him. He's very wrong

No one who has followed the career of that famously self-effacing and modest business leader Elon Musk could have expected him to boast openly about having secured approval from Tesla shareholders for two important initiatives: moving the company’s state of incorporation to Texas from Delaware, and “ratifying” his massive 2018 compensation package after it was invalidated by a Delaware state judge.

Ha ha. Just kidding. The day before the votes were formally tallied and announced after the company’s annual meeting Thursday, Musk telegraphed the results on X, formerly Twitter, the social media platform he owns.

Both resolutions “are currently passing by wide margins,” he tweeted on last week, adding, “Thanks for your support!!” and bracketing that line with a quartet of valentine-red hearts.

The board should recognize the influence of the sword of Damocles hanging over shareholder heads: the outcome of any stockholder vote could well be seriously distorted by Musk’s looming threat.

— Lucian Bebchuk and Robert J. Jackson Jr.

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Thursday evening, after the votes were in, he tweeted a photo of a cake with the iced legend “Vox Populi, Vox Dei,” a Latin phrase meaning “the voice of the people is the voice of the gods,” and appending the comment, “Sending this cake to Delaware as a parting gift.”

The Tesla board instantly executed the change of incorporation, which is evidently rooted in Musk’s conviction that Texas courts, which have little experience in adjudicating corporate governance issues, will be more pliant in his hands than the very experienced Delaware judiciary.

From all that, one might assume that the shareholder votes cleared away the legal complexities erected around the 2018 compensation grant by Delaware Chancellor Kathaleen McCormick in January.

That assumption may be wrong, according to several experts in corporate law. The idea that shareholders can retrospectively validate a corporate action overturned in Chancery Court is “divorced from the realities of Delaware law,” observed Charles M. Elson, one of the nation’s recognized authorities on the topic, in a May 13 legal brief.

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That may not be the only issue about Tesla and Musk that is arguably divorced from reality. By many objective standards, the electric vehicle maker is in a bad way. A grim story was told by its first-quarter results, released on April 23. The company disclosed its lowest automotive profit margin, 15.9%, in five years, a major decline from its peak of about 30% in the first quarter of 2022.

That reflected several rounds of price cuts to keep Tesla vehicles moving off the lots, resulting in a decline of $2.42 billion, or 13%, in auto sales during that quarter from the same quarter a year earlier. Tesla delivered 386,810 vehicles in the first quarter, down by 8.5% from the same quarter a year earlier. That includes deliveries of its most highly touted new model, the Cybertruck pickup, which has been ridiculed in the automotive press and on social media for its risibly blockheaded design and mechanical and cosmetic flaws.

Tesla faces stiffer competitive headwinds than it has encountered at any other time in its history. These are coming not only from legacy automakers that are coming to market with hybrid and fully electric models, but the Chinese EV-maker BYD, which overtook Tesla in deliveries in the fourth quarter of 2023, when it sold more than 526,000 all-electric vehicles compared with Tesla’s 484,510 in the same period.

More troubling from Tesla’s standpoint, BYD is taking steps to expand its market significantly beyond domestic drivers and into Europe and even the U.S.

Tesla also faces more shareholder discontent over Musk’s role in the company. In the past, his image as a technological visionary was inextricably linked with Tesla’s image and the appeal of its products; a Tesla without Musk at the helm was almost unimaginable. Investor confidence in his leadership was manifest; the share price closed on Nov. 1, 2021, at $407.36, when the company’s market value peaked at a stupendous $1.2 trillion.

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More recently, Musk’s reputation has waned among significant segments of the public, thanks to the increasingly strident, partisan, reactionary and antisemitic viewpoints he has expressed on X.

Investors aren’t especially happy about the company’s shrinking prospects. The shares are down by more than 54% from that peak close in 2021, by more than 33% from a year ago, and by nearly 25% year-to-date. As I write, Tesla’s market value is less than $600 billion.

One issue roiling the investor cadre is whether Tesla is as important to Musk as it used to be. His corporate universe includes not only X, but SpaceX and an artificial intelligence company dubbed X.AI. Musk has on occasion poached talent and resources from Tesla to benefit his other companies.

The Tesla board has gone along with that, but not all investors feel so tolerant. Two individual shareholders and the Cleveland Bakers and Teamsters Pension Fund sued over the practice on Thursday — filing the case in Delaware right under the wire before Tesla followed through on the reincorporation vote by making itself a Texas company.

They say they’re irked because Musk had been touting Tesla as, in his own words, “an AI/robotics company that appears to many to be a car company” and “the biggest AI project on Earth.” That’s an indication that Musk wishes to capture for Tesla the superior price/earnings multiple enjoyed by high-tech and especially AI companies (at the moment) in comparison with car companies. But if he’s shifting his AI efforts out of Tesla, that obviously won’t wash.

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And he seems to be doing so. The plaintiffs observe that Musk has poached AI engineers from Tesla to work at X.AI — at least 11 former Tesla employees went over to the new company. Furthermore, according to a report by CNBC cited by the plaintiffs, Musk personally ordered Nvidia, the global leader in AI processing chips, to divert 12,000 units ordered by Tesla to X and X.AI instead, adding months to the delays in “setting up the supercomputers Tesla says it needs” to develop robots and self-driving vehicles.

Even before the shareholder vote, Musk intimated by tweet that he might not be inclined to develop AI capabilities within Tesla, as opposed to at his other companies, unless the Tesla board granted him a 25% voting control of Tesla.

This isn’t the first time Musk has treated the companies he controls, whether private or publicly-traded, all as arms of his personal satrapy. After taking over X (then Twitter) in 2022, he brought over Tesla engineers to rework the social media platform’s software. And in 2016 he orchestrated a rescue of SolarCity, his failing solar power company, by merging it with Tesla. In that case, typically, his acolytes on both boards went along without objection and, evidently, without spending much time on analysis of the deal. (I’ve asked Tesla to comment on all these issues, but answers came there none.)

That brings us back to the compensation deal and Thursday’s votes.

In her 201-page decision issued on Jan. 30, Chancellor McCormick rescinded the 2018 pay package on several grounds. She found that the unprecedentedly large $56-billion package was excessive.

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That was especially so given the control Musk exercises over Tesla as its largest single stockholder (with 21.9% at the time of McCormick’s ruling and 20.5% as of March 31) and through his personal relationships with and influence over several ostensibly independent Tesla board members — relationships which, McCormick found, had not been adequately disclosed to shareholders voting on the pay package.

Musk reacted to McCormick’s ruling by proposing to take oversight of Tesla’s government out of the Delaware Chancery Court’s hands through a reincorporation in Texas. The Tesla board, which had changed somewhat since 2018 but was still supine toward Musk, also asked shareholders in effect to overturn McCormick’s ruling by voting on the pay package again.

In setting up the second vote, the Tesla board didn’t display much more inclination to examine the pay package than it had the first time around, when the process of developing the package was all but exclusively under Musk’s control.

This time, the board established a special committee of two board members. But one resigned early on, and the board never replaced him. In other words, the special committee was a committee of one, Kathleen Wilson-Thompson, a former executive of Walgreens and Kellogg’s. According to Tesla, the committee “did not substantively reevaluate the amount or terms” of the 2018 package “and did not engage a compensation consultant.”

Nor did the committee renegotiate the pay package with Musk. After all, the company said, the board had decided in 2018 that the package was “fair”; nothing had changed since 2018, so all that needed to happen in light of McCormick’s ruling was that there be more disclosure of board relationships.

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Is that so?

A lot has changed, obviously. To begin with, the 2018 package incorporated numerous incentive milestones that Musk would have to meet to receive any part of or even the full $56 billion. Tesla actually did reach those milestones, but what further incentives exist to keep Musk engaged into the future?

Musk’s threat to take his AI operations out of Tesla unless he receives more voting control obviously point to the need to keep him on board.

“Stockholders should know whether the board’s request for a vote is motivated by the threat — and what, if anything, the board plans to do about Musk’s threat if he attempts to carry it out,” wrote corporate governance experts Lucian Bebchuk and Robert J. Jackson Jr. prior to Thursday’s vote. “Strikingly, the board hasn’t conditioned holding the vote on Musk withdrawing his threat or committing not to carry it out if stockholders vote to approve.”

They add, “the board should recognize the influence of the sword of Damocles hanging over shareholder heads: the outcome of any stockholder vote could well be seriously distorted by Musk’s looming threat.”

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The Tesla board, therefore, has once again behaved as Musk’s cat’s-paw. That’s not surprising, since the board is nothing like truly independent. Its eight members include Musk, his brother Kimball, his longtime friends Ira Ehrenpreis and James Murdoch (a son of Rupert Murdoch), former Tesla executive and former SolarCity board member J. B. Straubel and, as chair, Robyn M. Denholm, who testified that the wealth she has collected as a Tesla director has been “life-changing.”

McCormick found that although Denholm didn’t have a personal relationship with Musk, her dependence on Tesla almost exclusively as a source of her personal wealth might have compromised her judgment in approving the 2018 package and contributed to her “lackadaisical approach to her oversight obligations.”

So assuming that the Delaware court won’t step in again to rescind the pay package, Musk is once again getting all he wants from Tesla, with even fewer incentives to perform for the future than he has had in the past.

Good for him. But if Tesla continues its recent decline in market value, its non-Musk shareholders will have no one to blame but its board, and themselves.

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Why companies are making this change to their office space to cater to influencers

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Why companies are making this change to their office space to cater to influencers

For the trendiest tenants in Hollywood office buildings, it’s the latest fad that goes way beyond designer furniture and art: mini studios

To capitalize on the never-ending flow of stars and influencers who come through Los Angeles, a growing number of companies are building bright little corners for content creators to try products and shoot short videos. Athletic apparel maker Puma, Kim Kardashian’s Skims and cheeky cosmetics retailer e.l.f. have spaces specifically designed to give people a place to experience and broadcast about their brands.

Hollywood, which hasn’t historically been home to apparel companies, is now attracting the offices of fashion retailers, says CIM Group, one of the neighborhood’s largest commercial property landlords.

“When we’re touring a space, one of the first items they bring up is, ‘Where can I build a studio?’” said Blake Eckert, who leases CIM offices in L.A.

Their studio offices also serve as marketing centers, with showrooms and meeting spaces where brands can host proprietary events not open to the public.

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“For companies where brand visibility is really important, there is a trend of creating spaces that don’t just function as offices,” said real estate broker Nicole Mihalka of CBRE, who puts together entertainment property leases and sales.

Puma’s global entertainment marketing team is based in its new Hollywood offices, which works with such musical celebrity partners as Rihanna, ASAP Rocky, Dua Lipa, Skepta and Rosé, said Allyssa Rapp, head of Puma Studio L.A.

Allyssa Rapp, director of entertainment marketing at Puma, is shown in the Puma Studio L.A. The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though.

(Kayla Bartkowski / Los Angeles Times)

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Hollywood is a central location, she said, for meeting with celebrities, stylists and outside designers, most of whom are based in Los Angeles.

The office is a “creation hub,” she said, where influencers can record Puma’s design prototyping lab supported by libraries of materials and equipment used to create Puma apparel. The company, founded in 1948, is known for its emblematic sneakers such as the Speedcat and its lunging feline logo, and makes athletic wear, accessories and equipment.

Puma’s entertainment marketing team also occupies the office and sometimes uses it for exclusive events.

“We use the space as a showroom, as a social space that transforms from a traditional workplace into more of an experiential space,” Rapp said.

Nontraditional uses include content creation, sit-down dinners, product launches, album listening parties and workshops.

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“Inviting people into our space and being able to give them high-touch brand experiences is something tangible and important for them,” she said. “The cultural layer is really important for us.”

The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though. There’s no retail portal to the exclusive Hollywood offices.

Puma shoes are on display in the Puma Studio L.A.

Puma shoes are on display in the Puma Studio L.A.

(Kayla Bartkowski / Los Angeles Times)

Puma is also positioning its L.A studio as a connection point for major upcoming sporting events coming to Los Angeles, including the World Cup this summer, the 2027 Super Bowl and 2028 Olympics.

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In-office studios don’t need to be big to be impactful, Mihalka said. “These are smaller stages, closer to green screen than a massive soundstage.”

Social media is the key driver of content created by most businesses, which may set up small booth-like stages where influencers can hawk hot products while offering discounts to people watching them perform.

Bigger, elevated stages can accommodate multiple performers for extended discussions in front of small audiences, with towering screens behind them to set the mood or illustrate products.

Among the tricked-out offices, she said, is Skims. The company, which is valued at $5 billion, is based in a glass-and-steel office building near the fabled intersection of Hollywood Boulevard and Vine Street.

The fashion retailer declined to comment on the studio uses in its headquarters, but according to architecture firm Odaa, it has open and private offices, meeting rooms, collaboration zones, photo studios, sample libraries, prototype showrooms, an executive lounge and a commissary for 400 people.

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Pieces of a shoe sit on a workbench in the Puma Studio L.A.

Pieces of a shoe sit on a workbench in the Puma Studio L.A.

(Kayla Bartkowski / Los Angeles Times)

The brands building studios typically want to find the darkest spot on the premises to put their content creation or podcast spaces, Eckert said, where they can limit outside light and sound. That’s commonly near the center of the office floor, far from windows and close to permanent shear walls that limit sound intrusion.

They also need space for green rooms and restrooms dedicated to the talent.

Spotify recently built a fancy podcast studio in a CIM office building on trendy Sycamore Avenue that is open by invitation-only to video creators in Spotify’s partner program.

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“Ambitious shows need spaces that support big ideas,” Bill Simmons, head of talk strategy at Spotify, said in a statement. “These studios give teams room to experiment and keep pushing what’s possible.”

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A new delivery bot is coming to L.A., built stronger to survive in these streets

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A new delivery bot is coming to L.A., built stronger to survive in these streets

The rolling robots that deliver groceries and hot meals across Los Angeles are getting an upgrade.

Coco Robotics, a UCLA-born startup that’s deployed more than 1,000 bots across the country, unveiled its next-generation machines on Thursday.

The new robots are bigger, tougher and better equipped for autonomy than their predecessors. The company will use them to expand into new markets and increase its presence in Los Angeles, where it makes deliveries through a partnership with DoorDash.

Dubbed Coco 2, the next-gen bots have upgraded cameras and front-facing lidar, a laser-based sensor used in self-driving cars. They will use hardware built by Nvidia, the Santa Clara-based artificial intelligence chip giant.

Coco co-founder and chief executive Zach Rash said Coco 2 will be able to make deliveries even in conditions unsafe for human drivers. The robot is fully submersible in case of flooding and is compatible with special snow tires.

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Zach Rash, co-founder and CEO of Coco, opens the top of the new Coco 2 (Next-Gen) at the Coco Robotics headquarters in Venice.

(Kayla Bartkowski/Los Angeles Times)

Early this month, a cute Coco was recorded struggling through flooded roads in L.A.

“She’s doing her best!” said the person recording the video. “She is doing her best, you guys.”

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Instagram followers cheered the bot on, with one posting, “Go coco, go,” and others calling for someone to help the robot.

“We want it to have a lot more reliability in the most extreme conditions where it’s either unsafe or uncomfortable for human drivers to be on the road,” Rash said. “Those are the exact times where everyone wants to order.”

The company will ramp up mass production of Coco 2 this summer, Rash said, aiming to produce 1,000 bots each month.

The design is sleek and simple, with a pink-and-white ombré paint job, the company’s name printed in lowercase, and a keypad for loading and unloading the cargo area. The robots have four wheels and a bigger internal compartment for carrying food and goods .

Many of the bots will be used for expansion into new markets across Europe and Asia, but they will also hit the streets in Los Angeles and operate alongside the older Coco bots.

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Coco has about 300 bots in Los Angeles already, serving customers from Santa Monica and Venice to Westwood, Mid-City, West Hollywood, Hollywood, Echo Park, Silver Lake, downtown, Koreatown and the USC area.

The new Coco 2 (Next-Gen) drives along the sidewalk at the Coco Robotics headquarters in Venice.

The new Coco 2 (Next-Gen) drives along the sidewalk at the Coco Robotics headquarters in Venice.

(Kayla Bartkowski/Los Angeles Times)

The company is in discussion with officials in Culver City, Long Beach and Pasadena about bringing autonomous delivery to those communities.

There’s also been demand for the bots in Studio City, Burbank and the San Fernando Valley, according to Rash.

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“A lot of the markets that we go into have been telling us they can’t hire enough people to do the deliveries and to continue to grow at the pace that customers want,” Rash said. “There’s quite a lot of area in Los Angeles that we can still cover.”

The bots already operate in Chicago, Miami and Helsinki, Finland. Last month, they arrived in Jersey City, N.J.

Late last year, Coco announced a partnership with DashMart, DoorDash’s delivery-only online store. The partnership allows Coco bots to deliver fresh groceries, electronics and household essentials as well as hot prepared meals.

With the release of Coco 2, the company is eyeing faster deliveries using bike lanes and road shoulders as opposed to just sidewalks, in cities where it’s safe to do so. Coco 2 can adapt more quickly to new environments and physical obstacles, the company said.

Zach Rash, co-founder and CEO of Coco.

Zach Rash, co-founder and CEO of Coco.

(Kayla Bartkowski/Los Angeles Times)

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Coco 2 is designed to operate autonomously, but there will still be human oversight in case the robot runs into trouble, Rash said. Damaged sidewalks or unexpected construction can stop a bot in its tracks.

The need for human supervision has created a new field of jobs for Angelenos.

Though there have been reports of pedestrians bullying the robots by knocking them over or blocking their path, Rash said the community response has been overall positive. The bots are meant to inspire affection.

“One of the design principles on the color and the name and a lot of the branding was to feel warm and friendly to people,” Rash said.

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Coco plans to add thousands of bots to its fleet this year. The delivery service got its start as a dorm room project in 2020, when Rash was a student at UCLA. He co-founded the company with fellow student Brad Squicciarini.

The Santa Monica-based company has completed more than 500,000 zero-emission deliveries and its bots have collectively traveled around 1 million miles.

Coco chooses neighborhoods to deploy its bots based on density, prioritizing areas with restaurants clustered together and short delivery distances as well as places where parking is difficult.

The robots can relieve congestion by taking cars and motorbikes off the roads. Rash said there is so much demand for delivery services that the company’s bots are not taking jobs from human drivers.

Instead, Coco can fill gaps in the delivery market while saving merchants money and improving the safety of city streets.

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“This vehicle is inherently a lot safer for communities than a car,” Rash said. “We believe our vehicles can operate the highest quality of service and we can do it at the lowest price point.”

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Trump orders federal agencies to stop using Anthropic’s AI after clash with Pentagon

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Trump orders federal agencies to stop using Anthropic’s AI after clash with Pentagon

President Trump on Friday directed federal agencies to stop using technology from San Francisco artificial intelligence company Anthropic, escalating a high-profile clash between the AI startup and the Pentagon over safety.

In a Friday post on the social media site Truth Social, Trump described the company as “radical left” and “woke.”

“We don’t need it, we don’t want it, and will not do business with them again!” Trump said.

The president’s harsh words mark a major escalation in the ongoing battle between some in the Trump administration and several technology companies over the use of artificial intelligence in defense tech.

Anthropic has been sparring with the Pentagon, which had threatened to end its $200-million contract with the company on Friday if it didn’t loosen restrictions on its AI model so it could be used for more military purposes. Anthropic had been asking for more guarantees that its tech wouldn’t be used for surveillance of Americans or autonomous weapons.

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The tussle could hobble Anthropic’s business with the government. The Trump administration said the company was added to a sweeping national security blacklist, ordering federal agencies to immediately discontinue use of its products and barring any government contractors from maintaining ties with it.

Defense Secretary Pete Hegseth, who met with Anthropic’s Chief Executive Dario Amodei this week, criticized the tech company after Trump’s Truth Social post.

“Anthropic delivered a master class in arrogance and betrayal as well as a textbook case of how not to do business with the United States Government or the Pentagon,” he wrote Friday on social media site X.

Anthropic didn’t immediately respond to a request for comment.

Anthropic announced a two-year agreement with the Department of Defense in July to “prototype frontier AI capabilities that advance U.S. national security.”

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The company has an AI chatbot called Claude, but it also built a custom AI system for U.S. national security customers.

On Thursday, Amodei signaled the company wouldn’t cave to the Department of Defense’s demands to loosen safety restrictions on its AI models.

The government has emphasized in negotiations that it wants to use Anthropic’s technology only for legal purposes, and the safeguards Anthropic wants are already covered by the law.

Still, Amodei was worried about Washington’s commitment.

“We have never raised objections to particular military operations nor attempted to limit use of our technology in an ad hoc manner,” he said in a blog post. “However, in a narrow set of cases, we believe AI can undermine, rather than defend, democratic values.”

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Tech workers have backed Anthropic’s stance.

Unions and worker groups representing 700,000 employees at Amazon, Google and Microsoft said this week in a joint statement that they’re urging their employers to reject these demands as well if they have additional contracts with the Pentagon.

“Our employers are already complicit in providing their technologies to power mass atrocities and war crimes; capitulating to the Pentagon’s intimidation will only further implicate our labor in violence and repression,” the statement said.

Anthropic’s standoff with the U.S. government could benefit its competitors, such as Elon Musk’s xAI or OpenAI.

Sam Altman, chief executive of OpenAI, the company behind ChatGPT and one of Anthropic’s biggest competitors, told CNBC in an interview that he trusts Anthropic.

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“I think they really do care about safety, and I’ve been happy that they’ve been supporting our war fighters,” he said. “I’m not sure where this is going to go.”

Anthropic has distinguished itself from its rivals by touting its concern about AI safety.

The company, valued at roughly $380 billion, is legally required to balance making money with advancing the company’s public benefit of “responsible development and maintenance of advanced AI for the long-term benefit of humanity.”

Developers, businesses, government agencies and other organizations use Anthropic’s tools. Its chatbot can generate code, write text and perform other tasks. Anthropic also offers an AI assistant for consumers and makes money from paid subscriptions as well as contracts. Unlike OpenAI, which is testing ads in ChatGPT, Anthropic has pledged not to show ads in its chatbot Claude.

The company has roughly 2,000 employees and has revenue equivalent to about $14 billion a year.

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