Why Elon Musk Is Comparing Index Fund Consultants To ISIS

Musk worries about the power other shareholders have over Tesla, and the advice they get

- Tim Higgins

The unsexy index fund helped make Elon Musk the world's richest man.

Now, he appears worried that passive shareholders will indirectly turn on him as Tesla shares sink in the midst of investor anxiety that the company has let its product pipeline stagnate.

Musk's index-fund concerns, which he has expressed publicly in piecemeal over the past two years, are twofold: Index funds have become too powerful, and they are overly influenced by proxy advisers that guide fund managers on votes in corporate matters.

Those worries might help explain why Musk, even as Tesla's largest individual shareholder, has contended that he holds inadequate control over the electric vehicle maker. In his latest explanation for wanting more control, he said this past week that the proxy advisers Glass Lewis and Institutional Shareholder Services, or ISS, pose a threat to him. Musk's voting power at Tesla slipped following his sale of some shares, in part to buy Twitter in late 2022.

"I call them ISIS," Musk said Wednesday of ISS, using the name of the militant group also known as Islamic State. "There's a lot of activists that basically infiltrate those organizations and have strange ideas about what should be done."

Shares of Tesla finished the week down 26% for the year after it reported on Wednesday disappointing fourth-quarter results and Musk cautioned that the company had entered a period of slowing growth as it works to bring out a next-generation vehicle, maybe by late 2025.

Unlike in past periods of volatility for Tesla's stock, Musk's grasp on the company isn't as strong as before, when he held more than 20% of the shares. Today, he directly holds 13%.