What would Tesla be without Elon Musk?
CEO Elon Musk’s stewardship of Tesla Inc (Nasdaq: TSLA) in in serious doubt after the U.S. Securities and Exchange Commission sued Musk for fraud this week, accusing him of making “false and misleading” statements about taking Tesla private with his infamous “funding secured” tweet. Musk’s vision has pushed Tesla to become one of the biggest and most innovative car companies on the planet, but Tesla stock has been falling for several weeks because of his erratic behavior. Is Tesla stock better off with or without Elon Musk?
Better with: Musk is central to Tesla’s success.
TSLA stock will plunge without Elon Musk because they are indelibly intertwined. Many retail shareholders own Tesla chiefly because they believe in Musk, who has become a legendary figure in the tech world, the auto industry and on Wall Street in short order. Institutional investors aren’t immune from this perception either, and indeed most of the bullish theses over the years were at their core based on Musk’s assumed competence and vision. Shares were down 12 percent on the SEC news, and analysts were panicking; one Barclays analyst said Musk’s departure could cost $130 per share as the “Musk premium” disappears.
Better without: Musk is not Wall Street-savvy.
There’s no question Musk is brilliant and innovative, but it takes a unique type of personality to successfully navigate the world of Wall Street. Musk has repeatedly lashed out at Tesla short sellers and famously ignored questions from Wall Street analysts on a Tesla earnings call. The best example of Musk being woefully ignorant of his role as the CEO of a public company is the “funding secured” tweet itself. Even if Musk made the tweet in good faith, he clearly didn’t handle the situation with the care a CEO of a $50 billion company should use.
Better with: Musk inspires passion.
Nobody can get Wall Street analysts and the general public excited about electric cars like Elon Musk. This is a guy who blew car enthusiasts away by unveiling a line of sporty Tesla roadsters, and then he had the hutzpah to put one in a SpaceX rocket and blast it into orbit just so he could send back photos of a mannequin in an astronaut suit cruising through outer space. Musk’s vision and personality has inspired an impassioned following, and that will fade away should Musk be forced out of the C-suite.
Better without: Musk drives away talent.
The executive turnover at Tesla has been highly publicized, with at least 13 key executives leaving the company in the past year alone. Some analysts have speculated that Musk’s quirky personality and management style is driving talent away. The company’s chief accounting officer recently resigned after concluding that Musk and others were not listening to his ideas. There are also reports of Musk yelling at engineers working long hours on Model 3 assembly lines. If Tesla gets a reputation as a difficult work environment, not only will talent leave the company, new talent will likely steer clear of Tesla all together.
Better with: Elon Musk is a genius.
While the perceived potential of TSLA stock will be unmistakably damaged if Musk leaves, it wouldn’t be true if there wasn’t some substance to back it up. Musk is, unquestionably, a genius. You don’t build three separate billion-dollar companies by accident. The odds of PayPal Holdings (PYPL), Tesla, and SpaceX all succeeding due to luck alone are astronomically small and essentially prohibitive. Musk thinks boldly. Perhaps too boldly sometimes, but still, few others could’ve gotten Tesla to where it is today, and there are no more Elon Musks waiting in the wings.
Better without: Musk is unpredictable.
If there’s one thing that investors fear the most, it’s surprises. Whether it be smoking marijuana on the Joe Rogan podcast, publicly calling a Thai cave rescue diver a “pedo guy,” or picking fights with the mainstream media, Musk is seemingly a nonstop source of unpredictable negative headlines. Tesla investors are even uneasy on earnings calls at this point after Musk’s controversial performance on the first-quarter call in 2018. Risk-averse investors want to go to bed at night without fear of waking up to some crazy Musk-related headline the next morning, and his departure would at least eliminate that risk.
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Is Tesla Stock Better With or Without Elon Musk? originally appeared on usnews.com
