For Tesla Investors, Elon Musk’s participation with Donald Trump was a car wreck that took place in two chapters, one in slow motion, the next on the quick locking. During the 130 days of Musk, Doge, a crusade whose obstinate aggression practically practically defined the state of mind of the administration in the first months, the head of the EV made European customers in future by supporting the far -right politicians, and as sales fell in the tastes of Germany and France, and severe competition has narrowed its market share in China, neglected The task of the task of falling mass problems by lowering the fronts and the head. In its absence, Tesla’s actions and benefits sang.
As bad as this episode was revealed for Tesla, it at least provided an increase potential. “Even before Doge, Musk clearly had too many spoons in too many pots through SpacexNeuralink, X And his other companies, then he became even more concerned by putting another spoon in another pot, “explains Eric Talley, professor of law and business at the University of Columbia.” But being in the White House also included a little insurance policy for Tesla….
Now, said Talley, Musk has alone transformed this “insurance policy” into a liabilities – the threat that the administration will penalize the manufacturer of VE, or at best do nothing to protect him. When Musk left Doge on May 30 in the middle of the fanfare of sending the Oval Office of Trump, Tesla shareholders did not yet have little toast, because the CEO did not discharge the myriads of functions of his empire to refocus on the manufacturer in difficulty. Then, the musk-top quarrel which exploded on June 5, triggered by the laceded withdrawal of the former bill on the budget of the president’s signing, put Tesla overnight in a place where it is threatened not only by mediocre finances but the insult triggered to his old sponsor which invites both reprisals by Trump and the survival of Musk as a company so critical for his gigantic.
“What is different in the past 24 hours,” says Talley, “is that Musk not only moved from insurance to have a CEO at the top of the government. He withdrew an anti-insurance policy. Any moment could break out in a flame on each side on social networks that puts a goal in Tesla’s back. ” He notes that Tesla’s rivals are faced with the same opposite winds from the end of EV grants to buyers’ subsidies have proposed the so-called “big big bill”, but the overhang of the antagonent the president “is a target that his competitors have not”.
Indeed, the day he exploded, the collapse sent Tesla shares in shock of 14.3% in a free fall which erased $ 153 billion in market capitalization, the greatest drop in a day in the history of the company. Although it is decreed around a third of these losses the next day, the action is still in place 40% below its recent summit in mid-December.
Charles Elson, founding director of the Weinberg Center for Corporate Governance of the University of Delaware, and one of the main experts in the rules and boards of directors of ethics, said Fortune that in any other large public company but Tesla, Musk would have left – and dumping would have occurred well before the new hurricane. “If his name had been Joe Dokes, he would have left for a nano-second,” explains Elson, “given the damage of reputation, he has alienated a good number of customers when entering politics at Doge. It’s a mess. No other advice would have left a CEO getting involved in this way.
What keeps musk in work is its iron grip on the board, says Elson. He notes that Musk controls 30% of the shares and that its influence extends beyond the power of this participation due to the loyalty built, in part, by granting directors of large options of options which have made many of them extremely rich. Elson believes that it would be extremely difficult for unhappy shareholders to prevail in the proceedings in relation to the members of the board of directors who could work to force musk. “The path to the victory of responsibility affairs against the administrators is a twist and a jumper,” he eager. “The fact that Tesla has reinstated from Delaware to Texas makes things much more difficult. This is why Tesla moved to Texas. It was a race down and they ran to the bottom of the barrel.” For Elson, Musk cannot be forced to leave, and will not go unless he wants: “And nothing can do that no one can do it.”
However, the size of Musk’s participation which is the source of its control, and its attachment to Tesla in the future which is attached to this position, are tested by historical decisions before the courts of Delaware. The decisions, made last year, canceled the share package of $ 56 billion awarded by the board of directors in 2018 which represents two thirds of Musk’s assets. Tesla is now attractive to restore this compat. If the Supreme Court of Delaware confirms the decision, Tesla is certain to try to reintegrate this compensation. But this route courts the risks much higher now.
According to Talley, the Board of Directors under the law of Texas could either try to unilaterally restore the package, or to put the question to a vote of the shareholders. He believes that the old more direct approach now seems much less attractive for directors than a few days ago. “The board of directors may now opt for a shareholder vote,” he said, taking into account the potential reaction of Musk’s reward so royally when Tesla is in difficulty, mainly because of her own actions. “He could call on the board of directors to go in this direction and count on rejection,” he adds. A drop increases another potentially macabre result. “If they have a shareholder vote and it becomes negative, then you have a succession problem. You don’t want a CEO to take revenge on the business”, a way that the legend Mercurielle could take. We also do not know how Musk will react if the Supreme Court of Delaware reigns against him – for example, he has much fewer Tesla, and his incentive to rebuild his greatest source of his wealth would be considerably reduced.
Tesla benefits from a gigantic bonus with the kind authorization of the emblematic status of Musk and the series promises of the delivery of autonomous technology which will transform Tesla from a metal bend into a fabulously lucrative technological player. As I detailed after Tesla reported the results of the first quarter, he in fact lost money by selling cars and batteries and only had a small profit thanks to sales of regulatory credits. Its “hardcore”, the reproducible benefits of automobile and battery deductibles in the previous four quarters only totaled $ 3.5 billion, compared to $ 12 billion in 2022. At a PE of 30, which represents three times the average of the automotive industry, Tesla – based on the fundamentals of the foundation – for the value of $ 100 billion. But even after the recent sale, its assessment is $ 960 billion. Consequently, the difference of more than $ 800 billion comes from what I will call the “Musc magic premium”, created by its promises of epic innovations to come.
If Musk was to leave, a large part of this magic premium comes out with him. This can already disappear. So, for Tesla shareholders, it’s bad anyway. Musk leaves and a practical leader arrives, but the Halo of genius no longer protects the stock, where it remains and continues to start the fights that undermine the brand and spreads its time among half a dozen pioneer companies which he could find more fascinating. As Elson says, “anyone else would be dismissed after that, but he feels that he cannot be. He has this aura who makes him untouchable. He has a cult status which seems to follow him and make people believe that he is not normal that he did not operate normally.” But, warns Elson, while Musk’s behavior becomes more and more scandalous, the burden he has accumulated on Tesla, now and what investors increase perceiving, catches up. We have just seen a shocking example of the speed at which it can happen and how fast the myth can dissolve.
This story was initially presented on Fortune.com
