In one aspect you could say that Tesla’s entire value is tied to Elon Musk .
It is his dream and determination that has created a disruptive company that has shaken the automotive industry to its core.
With Tesla a cash-burning, money-losing machine (at least so far), creating over $50 billion in value is tremendous.
At some point in time, Musk won’t be at Tesla, but that will hopefully be a long ways from now. However, the market does provide feedback on how much he is worth to the company . Calculating the changes in Tesla’s market cap gives one indication of how valuable Musk is to the company.
Starting the day after Elon Musk’s tweet about taking Tesla private to a New York Times interview the company’s stock has been in a free-fall. Before the first tweet on Tuesday, August 7, there was a report from the Financial Times via CNBC that Saudi Arabia’s Public Investment Fund, or PIF, had taken a 3% to 5% stake in Tesla.
This jumped the stock from Monday’s close of $341.99 to about $371, up $29. It eventually closed at $379.57 on Tuesday after it got a bit more juice from Musk’s tweet about taking Tesla private at $420. This exceeded its recent high of $370.83 on June 18.
However, starting the next day, the stock declined substantially as investors became concerned about the haphazard way Musk announced this. It becoming obvious that the Board was blindsided amid reports of the SEC asking questions not just about this but previous Model 3 statements from Musk, and finally a New York Times interview of Musk was released where he confessed to being under a huge amount of stress.
How much in dollars has all of this cost investors
I’ll break the analysis down into before the New York Times interview, how much after and in total. Keep in mind that Tesla has approximately 170 million shares outstanding.
Before the New York Times article:
- Start with Tuesday’s, August 7, intra-day stock price of $371 after the Saudi announcement
- To Thursday, August 16, close of $335.45, is a fall of about $35.50 or 9.6%
- This cut Tesla’s market cap by $6 billion
Friday, August 17, move:
- Maybe the more telling stock move is Friday's decline of $29.95, or 8.9% to $305.50
- This cost investors just over $5 billion
- The company is still worth over $52 billion
- But it does show how important Musk is to the company
From the Saudi announcement to Friday, August 17
- Decline from $371 to $305.50 or $65.50 and 17.7%
- Total $11 billion market cap hit
- However, it is still above the $300.84 the stock was before the June quarter’s results announcement on August 1
Tesla desperately needs a COO and maybe a different CEO
Musk is currently chairman, product architect and CEO of Tesla, CEO and lead designer at SpaceX and co-founder and chairman of OpenAI, along with being "Mr. FixIt" on the Tesla manufacturing line. He has also created Hyperloop, Neuralink and The Boring Company.
I’m sure the board realized this a long time ago, and I wrote in December “Elon Musk Needs To Clone Tim Cook.”
The company needs to move beyond having a visionary and someone who sleeps on the factory floor, to an executive who can execute and grow a company of this size.
One big question: If this were to happen anytime soon, would Musk take on a different role? He may be willing to given what he said in the Timesinterview.
One indication is by looking at the Stock Performance Proposal that was granted to him earlier this year. It is over a 10-year period, was valued upward to $55.8 billion, and Musk could become the executive chairman and chief product officer to remain eligible.
There are definitely financial reasons for Musk to stay, and he doesn’t have to be the CEO. Keep in mind these are stock options with a strike price of $350.02, so they are currently underwater.
