Tesla CEO Elon Musk, left, sits with Texas Gov. Greg Abbott.
Elon Musk, billionaire and chief executive officer of Tesla.
A Tesla Cybertruck.
A Tesla vehicle is charged at a Tesla charging station.
Shareholders will soon reveal whether Tesla is a corporation or a cult by voting on whether to make Elon Musk the highest-paid part-time CEO in history despite the stock price collapsing 40%, the company laying off 14,000 workers and a judge calling his hand-picked board’s decision-making deeply flawed.
Musk and Tesla’s directors are spending millions to convince shareholders to give up $56 billion after the company missed sales targets and failed to launch the new Model 2 on time, if at all. Analysts at Houston investment bank TPH Energy Research expect the stock to drop another 17% before bottoming out.
Tesla’s biggest retail shareholder, Leo Koguan, told the energy transition website Electrek that he would vote against the deal in June. “Tesla is a family business masquerading as a public company,” he explained.
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RELATED: Tesla asks shareholders to reinstate Elon Musk’s $56 billion pay plan that was rejected by Delaware judge
Koguan’s 27 million shares are not enough to block the proposal or an additional vote on reincorporating Tesla in Texas, out of reach of that pesky Delaware judge. The swing voters are the world’s largest asset managers, including Vanguard, BlackRock, State Street and Geode Capital Management.
The calculus is complicated. The world’s richest Texan definitely does not deserve $56 billion in compensation for 10 years of work, especially since running SpaceX, Neuralink and Twitter, now known as X, has made him a part-time employee. But if the shareholders do not grant his wish, they must wonder how much a Musk temper tantrum will hurt the stock price.
Musk has already menaced Tesla.
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“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” he posted on X. “Unless that is the case, I would prefer to build products outside of Tesla. You don’t seem to understand that Tesla is not one startup, but a dozen. Simply look at the delta between what Tesla does and GM.”
Yes, let’s compare Tesla to General Motors. Tesla is valued at about $460 billion with an extraordinary price-to-earnings ratio of 34, which means investors think it is worth $34 for every dollar the company earns.
General Motors is worth $48.82 billion and has a standard price-to-earnings ratio 5.78. The stock yields a dividend of 1.14%, while Tesla yields nothing. GM generated $171.84 billion in revenue in 2023, compared to Tesla’s $96.8 billion.
Tesla needs a secret technology that will change the world to justify its current stock price. Despite this unlikely outcome, Musk wants Tesla shareholders to give him half of last year’s revenue, or he’ll hobble the company.
But would he really?
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Tesla stock represents $61.6 billion of Musk’s $170 billion net worth, according to the Bloomberg Billionaires Index. Corporate filings show Musk has pledged 58% of his Tesla shares to secure personal debts, which means he can’t sell it.
Tesla is more than autos. The company makes batteries for energy storage, both small and large, as well as robots and self-driving software. If Musk spins off Tesla’s artificial intelligence arm into another company, the value of all the product lines will collapse.
Musk’s fortune totaled $256 billion in July before Tesla’s stock dropped. Does Musk really want to crater Tesla stock by another third?
Considering Musk’s impulsivity, no one should rule out a conniption fit where he blows it all up. The more interesting question is whether Tesla is better off without him at the helm.
Musk’s right-wing politics have hurt Tesla’s reputation, and many Tesla customers are embarrassed by his behavior. I recently met a Model Y owner who hastened to explain he’d bought the car before Musk started backing fringe Republicans.
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Consumer research company Strategic Vision reports that Democrats who once used Teslas to virtue-signal are abandoning the brand due to Musk’s antipathy toward labor unions, environmental laws and good corporate governance.
Musk’s latest plans to take Texas parkland and remove his Texas Gigafactory from Austin’s extra-jurisdictional environmental regulations betrays his arrogance and greed.
If Musk left, Tesla’s stock would fall quickly as his acolytes sell off in protest. However, a realistic price-to-earnings valuation, a more professional management team and a lack of daily drama would set the automaker on a more stable, profitable course for investors outside Musk’s inner circle.
The company’s shareholders may fold to Musk’s blackmail and give him the $56 billion, but I have no doubt he will get his comeuppance. Greedy billionaires, like messianic cult leaders, always provide the means for their own destruction; it’s only a matter of time.
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Award-winning opinion writer Chris Tomlinson writes commentary about money, politics and life in Texas. Sign up for his “Tomlinson’s Take” newsletter at houstonhchronicle.com/tomlinsonnewsletter or expressnews.com/tomlinsonnewsletter.
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