| 6:46 PM EST

Musk Says Tesla Shares Cost Too Much. Wall Street Agrees.

Company sheds $14 billion in market value in two days
#people #Tesla

Share

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

It’s been a weird half-week for Tesla CEO Elon Musk.

It began on Wednesday with good news. Tesla reported its third consecutive quarterly net profit, a first for the chronically money-losing company.

True, the net was only $16 million and resulted from selling clean-air credits to other carmakers, not electric vehicles to its own customers. But still.

Sales and revenue were up for the quarter in spite of the coronavirus crisis. One reason is that Tesla’s home plant in California didn’t heed pandemic shutdown orders until the last week of March.

The unexpectedly positive first-quarter financial stats pushed Tesla’s stock price up 9%, or nearly $66, to $866 overnight. It was a happy picture.

Tweet Alert

But then Musk fired up his infamous Twitter account. In a flurry of tweets—including one in which he announced he is selling his house and most of his possessions—Musk opined that “Tesla stock is too high.”

Talk about a self-fulfilling prophecy. Tesla’s share price promptly headed south, skidding 19% in two days to close the week at $701. The slide erased $14 billion from Tesla’s market value—and $3 billion from Musk’s own stake in the company.

The drop also threatens to upend the huge bonuses Musk stands to collect if Tesla’s market cap averages more than $100 billion. It’s above that level now, but antics like this surely won’t help it stay there.

Same Ol’ Musk

This isn’t the first time Musk has triggered a precipitous swing in Tesla’s share price. He did it in 2018 over his deep annoyance at the company’s short-sellers.

Image: Tesla

In a nine-word tweet, Musk revealed that he was thinking of taking Tesla private (at $420 per share) and had arranged the funding to do it. That wasn’t quite true, and he quickly walked back the comment.

But it was too late.

The tweet triggered a surge in the stock, then at $343 per share. Investors felt misled. The Securities and Exchange Commission was not amused by Musk’s cavalier approach to the fiduciary duties of head of a publicly-traded company and filed a lawsuit to throw him out of the company.

Two months and $40 million in fines later, Musk agreed to step down as chairman for two years and allow a special in-house committee to monitor his tweets.

Five days after the settlement, an obviously unrepentant Musk taunted the SEC, describing it in an unfiltered tweet as the “Shortseller Enrichment Commission.”

Onward

What does this week’s interlude mean? Probably not much in the long term. Tesla under Musk has had a profound and transformative impact on the auto industry in spite of its leader’s unconventional style.

Related Topics

RELATED CONTENT

  • 8 Rules for Getting Things Done Through People

    Effective management is a timeless skill—as demonstrated by this treasure of an article from the AutoBeat Group archive. Although the tools of the trade have changed and proliferated, the basics remain the same. Here are 8 old school (and just darn practical) rules for being an excellent manager. 

  • Nio Plant Venture Lands $1.5 Billion Investment

    Chinese electric-car startup Nio Inc. is forming a manufacturing joint venture with Beijing E-Town International Investment and Development Co., which is investing 10 billion yuan ($1.5 billion) in the business.

  • UAW Members Hike Pay for Senior Leadership by 31%

    Delegates to the United Auto Workers union’s annual convention in Detroit have overwhelmingly approved a 31% raise for their salaried international leaders.