Tesla’s biggest investor: it’s a family business masquerading as a public company

Tesla's biggest investor: it's a family business masquerading as a public company

Leo KoGuan has invested more money into Tesla than anyone in the world, yet he can’t even get his concerns heard by the company’s board. The shareholder is frustrated with some of the CEO’s recent controversies, but with the board MIA, there’s no way to reign him in.

We first reported on KoGuan in 2021 when the little-known investor became the third largest individual shareholder in Tesla behind Elon Musk and Larry Ellison.

The Indonesian-born Chinese American businessman is better known for founding SHI International Corp, a large private IT company that made him a billionaire. He is also involved in academia and philanthropy.

KoGuan has previously described himself as an “Elon fanboy” (the featured image above is him and Musk) and believes in Tesla’s mission to accelerate the world’s transition to sustainable energy. He has been willing to put his money on it and by 2022, he had invested more money in Tesla than Musk himself.

Of course, Musk invested early in Tesla, and therefore, he holds a bigger share with a smaller investment.

KoGuan is the third largest individual shareholder in the company, but you could argue that he is the biggest Tesla investor as he invested more than anyone in the company: $3.5 billion.

The investor is active on X. On the platform, he has been mostly supportive of Musk and Tesla, but like many other shareholders, he started to be more critical since Musk sold about $40 billion worth of Tesla shares to buy Twitter.

Interestingly, KoGuan doesn’t really comment on Musk’s most controversial statements, but he is concerned about his sales of Tesla stocks, how he did them, and what it means for his commitment to Tesla.

More recently, he also made fun of Musk’s request to have 25% voting power of Tesla:

KoGuan likes to call Tesla shareholders Elon’s “adopted children” and more recently, his “abused adopted children”. “Dear leader” is a reference to Kim Jong-il, the former supreme leader of North Korea.

I asked him yesterday if he has received any feedback from Tesla’s board or investor relations regarding his concerns, and this was his response:

“No response. Nil. Tesla is a family business masquerading as a public company to benefit only one person with his few friends and family. “

KoGuan is particularly concerned about the lack of oversight on how Musk dumped his Tesla shares on the open market. He told Electrek:

Why SEC allowed a CEO of a public company to dump his stocks worth more than $40 billion naked in the market to push the price down while predicting a market crash? He is now negative investing in Tesla or about minus $39 billion. He could have asked Goldman Sachs and Morgan Staley to sell those in block sales to fund managements that could keep those stocks, not dumping them in the market? Tesla’s shareholders are his abused adopted kids whom he could abuse with impunity.

It is fairly common amongst large shareholders and company insiders to set up a plan to sell large amounts of stocks in order to minimize the impact on the market.

The investor is bringing up legitimate questions and even though he is one of the largest shareholders, he can’t be heard by the board.

The board of directors of a public company is tasked with setting strategy, overseeing management, and protecting the interests of shareholders and stakeholders. It is technically overseeing the CEO, Elon Musk, who is, in turn, in charge of the entire management and operation of the company.

For large companies like Tesla, it is preferred that the board be independent of the management, but in the case of Tesla, the board has long been seen as being under Musk’s control. As Tesla grew, shareholders put pressure to hire independent board members, which Tesla eventually did.

But the board is still widely believed to be too close to Musk.  Musk’s brother Kimbal, as well as longtime friends Ira Ehrenpreis, James Murdoch, and JB Straubel, are all on the board.

The board has also been granted record high compensations and even had to return $735 million in stock and cash as part of the settlement of a lawsuit brought on by shareholders over what they believed to be overcompensation.

Electrek’s Take

“Tesla is a family business masquerading as a public company.” Those are strong words coming from the biggest investors in the company. And it’s hard to argue against those words.

Do you know of any other major public companies like Tesla that don’t even have a public relations department? Elon is basically the sole mouthpiece for the company.

Tesla has 140,000 employees. It’s worth more than $600 billion. And yet, it appears to be completely under Elon’s thumb, for better or worse. It might have been for the better early on. No one believed in the vision more than Elon. His unwavering belief in himself and the mission helped break through doubts, but now Tesla is a different company. It’s not the underdog fighting for the impossible anymore. It made the impossible happen. EVs are now mainstream. Energy storage is now a critical part of the renewable energy infrastructure.

Now, it is about properly managing the immense scaling of that business, which is badly needed to support the world’s transition to renewable energy. It’s about a wide appeal. It’s not about being decisive. Tesla might need strong governance more than it needs a maverick at this point.

As for the board, it remains silent and uncommunicative to shareholders despite serious conflicts of interest and even possibly a breach of fiduciary duties of its CEO.

In 2018, Elon left OpenAi officially to “avoid a conflict of interest as Tesla is increasingly working on artificial intelligence“.

Yet, now 6 years later, Elon poaches Tesla employees to work on X and his new AI startup xAI, and openly talks about not building AI products at Tesla if he doesn’t get 25% control over the company, but the board doesn’t do anything.

Even one of the biggest shareholders and supporters of the company, Leo KoGuan, can’t get his concerns heard by the board. What hope do smaller investors like us have? It’s shameful, really.

The fact that Elon has the guts to ask for more control over Tesla when it’s clear that he has complete control over the company right now is absolutely ridiculous.

Of course, he only wants control of the votes and “not more economics”, as he said, and it’s just a coincidence that there’s no way to give him more control over the votes without giving him more shares, which he wasted on an overpriced Twitter.

There wouldn’t be a Tesla without Musk. It would have died on several occasions without him. But Tesla also would have died without its strong base of retail investors. They need to be heard. The board needs to do better.

I still have a little bit of hope though. I think the board could find the courage to confront Musk and, at the very least, have him agree to a framework that keeps Tesla safe from his clear conflicts of interest. If even that can’t be achieved, it might be time for a new full-time CEO at Tesla.

What do you think? Let us know in the comment section below.

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