This uTube talk has one has two powerful messages, Shareholder Democracy, the first 2/3rds, & Technology Stock Picking, the last third.
Wall Street MIA on Tesla w Alexandra Merz
Shareholder Democracy
In principle I was always against shares with special voting rights. My thinking was that if you want my money but not my opinion, sell me bonds that have stated returns but no voting rights.
Tesla changed my mind. Many if not most stocks are controlled by institutional investors who value short term results over long term outcomes. Based on this near sighted vision they vote for stock buybacks even when the cash is better used developing long term business segments. Founders have a good reason to protect their long term vision.
The first part of the linked video is about how retail investors got two mayor Tesla proposals approved, Elon’s pay package and reincorporating in Texas. Alexandra MERZ’s activism was quite spectacular.
Technology Stock Picking
The last third is self congratulatory on having invested early in TSLA ignoring the risk of NOT Crossing the Chasm.
Many investors bet too early on technologies before they become the basis of sound investing, the reason to wait until they have Crossed the Chasm. Two notorious examples are George Gilder and Cathie Wood which can lead to serious losses in the search for El Dorado.
Without having watched the video, I sort of agree. But then you get to a situation like Sherri Redstone, who has super duper special (inherited) voting rights at Paramount, and who has watched the value of her father’s company decline by 2/3, and who passed up several opportunities to sell at a better price, all because she didn’t get a premium for her voting stock - to the detriment of regular stock holders. So she screwed herself, screwed regular stock holders, and wasn’t the “founder with a vision” anyway.
How do you make the super voting rights go away once the founder is gone?
Easy! Grant the extra voting rights only to the original owner. They lapse once the stock changes hands. This is sort of built in to the Delaware legislation, they don’t allow extra voting right except at the IPO (or something to that effect). This is one of the reasons for Tesla moving to Texas.
I have a better solution. Don’t allow special voting rights EVER. One share, one vote. Always. Want to have more voting rights, well, hold more of the equity and cash out less of it.
The original owners of Tesla are Marc Tarpenning and Martin Eberhard. Eberhard left Tesla on bad terms and went to work for Volkswagen. I doubt Musk gets either his 2012 or 2018 compensation packages if Eberhard has special voting rights.
