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Some say the Tesla (NASDAQ: TSLA) share price defies rational explanation. And some say the same applies to charismatic CEO Elon Musk himself.
What if the two were to part? A share price slump could be on the cards.
Ahead of the company’s annual meeting on 6 November, Tesla chair Robyn Denholm warned shareholders Musk could leave if they don’t approve his bumper potential payday.
It would grant Musk stock options tied to challenging targets — including a market cap of $8.5trn. Denholm suggests Musk, who many consider essential to Tesla’s hopes, needs to be incentivised by personal profit potentially eclipsing anything that’s gone before.
Gurus old and new
Does it make sense to compare Elon Musk to Warren Buffett, the man behind the astonishing long-term success of Berkshire Hathaway? Berkshire shares gained 5,502,284% between 1964 and 2024. The S&P 500 — including dividends — managed a relatively piffling 39,054%.
I’ve read every word of every single one of Warren Buffett’s letters to Berkshire Hathaway shareholders from 1977 to 2024. And never, not ever, not even one single time, have they ever suggested Buffett was motivated by his own personal profit. Not once!
Warren Buffett has always come over as being passionately driven by looking after the investors who trusted their hard-earned money to his skills and experiences. If I buy Tesla shares today, will Elon Musk put me first?
Personality cult
How did that old theme go? Love him or hate him, you can’t ignore him? That’s undeniably true of Musk. His motivational drive is legendary. And some of the quotes attributed to him underline the need to push forward in the face of risk. But they deserve closer inspection.
Musk is alleged to have said: “Failure is an option here. If things are not failing, you are not innovating enough.” But I can’t find a primary source to confirm that.
What about: “When something is important enough, you do it even if the odds are not in your favor“? I’ll give him a win on that one, sourced to a 2012 piece on CBS News.
The investor choice
For me, the value of a stock depends on the company itself and not any larger-than-life personalities. And on that score, I confess my Musk scepticism might not be not entirely supported.
It’s a mistake to judge Tesla as just a car maker. The company’s development of robotics-based transport automation surely has enormous potential. Its intellectual property in energy technology is also pushing the envelope. And I really do see a positive case for considering Tesla even at today’s high share price valuation.
I can’t do it
But while Elon Musk’s volatile personality appears utterly inseparable from Tesla in the minds of his supporters, I can’t get on board. What did he do to the market value of what used to be called Twitter, now a shadow of its former investment value? Was that a wise business decision? If we think Tesla equals Musk, we have to consider things like that.
I’m not going to touch on fundamental measures, like the price-to-earnings ratio. But when it all seems to be based on price-to-ego, I’m out.