Will Musk Leave Tesla?
Few companies stir up passions like Tesla Inc (NASDAQ: TSLA), and fewer still have CEOs as famous as Elon Musk. In fact, some would argue that Musk’s celebrity status played a huge role in the rise of the TSLA stock price.
So what happens if Elon Musk leaves Tesla?
Rumors abound that the iconic billionaire is waiting for the end of Tesla Model 3 rollout. After that, it could be adios for Musk, because there is little left for him to do at the electric car company.
Tesla was little more than a fledgling startup when he joined it, fresh from his PayPal Holdings triumph. His talent for disruption made him the perfect candidate to take its stock price into the sky, and so he did.
My favorite example of Musk’s obsessive nature is told by his co-founders at PayPal. They say that on the day PayPal sold to eBay, the entire staff got heavily inebriated at a local bar. All except Musk, that is. He was in the corner of the bar reading a manual on electric car batteries.
How many people would do that? After having sold a company for north of $1.1 billion, how many people would immediately move on to the next challenge? Most would savor the moment.
Not Musk, though. He lives for taking on big problems. That’s why he was so well suited to Tesla in its growth phase. The company require a bold visionary at the helm, but now that Tesla is on the track to reach mass-production, the job of CEO is completely different.
The company has no use for a visionary CEO–it needs an organizational whiz to make the trains run on time. It needs, in other words, Tim Cook, not Steve Jobs.
Elon Musk is fully aware of this change. He previously hinted that he might leave once Tesla rounded the corner on its expansion plans. So, it shouldn’t come as a surprise that he might be on his way out.
There are certainly more important demands on his time. For example, he could turn to one of the other ideas he has had in recent years.
- SpaceX: A private space launch provider.
- Neuralink: A futuristic company making machine-human brain interfaces.
- The Boring Company: A company that is trying to solve traffic problems by drilling tunnels under city centers.
- OpenAI: A non-profit artificial intelligence research company.
- Hyperloop: Musk’s idea for a rapid regional transport system.
All five are BIG, challenging enterprises that need a charismatic salesman. Musk founded them on the hopes that they would succeed (presumably). It’s only natural to imagine that he’ll want to see that happen personally rather than from a distance.
If there’s one thing he learned from the SolarCity Corp (NASDAQ: SCTY) fiasco, it was that outsourcing his ambitions is a foolish idea.
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Elon Musk Impact on TSLA Stock Price
Some people have argued that Tesla stock would crash if Elon Musk left the company. They say his celebrity status is propping up the share price.
Are they right?
It certainly seems so. TSLA stock trades at a sky-high multiple compared to its automobile brethren, a fact that is repeated often and loudly by Tesla bears.
Plus, the company raises money quite easily.
It tapped debt and equity markets a combined three times since Tesla went public in 2010. Normally, investors stop opening their wallets after a few funding rounds, but charismatic CEOs get longer leashes than boring ones.
And boy, is Elon Musk charismatic. He gives big speeches, makes bold predictions, and ensures there is a “cool” factor to nearly everything he does.
For instance, his rocket ship is named the “Falcon,” a reference to the “Millennium Falcon” from Star Wars. There’s no reason for him to do that; except that it inspires interest in what he’s doing.
He could have called it the “SpaceX 1” or something functional like that. But he has a streak of showmanship that’s common to all great leaders.
He knows how to enchant the media.
Journalists are mesmerized by his promises of a green-powered, interplanetary future. They shower him with coverage, which in turn leads to more name recognition.
And psychological studies show us that recognizing something make us more likely to trust it.
In politics, this means that the most well-known candidates often win the election. But in business, it means that investors are more patient with famous CEOs.
As a result, Musk is tied to TSLA stock.
He is as important to Tesla stock as Warren Buffett is to Berkshire Hathaway’s stock, or Mark Zuckerberg is to Facebook’s stock. So, what will happen to TSLA stock if Elon Musk leaves after the Tesla Model 3 rollout?
TSLA Stock Price History
Having Musk as a celebrity CEO certainly helped Tesla stock weather rainy days. For example, if you look at the TSLA stock price history, you’ll notice it accelerated far before there were any tangible signs of success.
Chart courtesy of StockCharts.com
In the second quarter of 2013, TSLA stock began a rally that drove it up more than 550% in a single year. Part of what drove that rally was a belief that Tesla could take on the big automakers.
Investors weren’t pouring money into TSLA stock because it made a great luxury car. The “Model S” wasn’t the catalyst. Rather, Elon Musk had managed to convince investors that he was David to the car industry’s Goliath. He was the turtle, they were the hare.
As the market bought into his vision, Tesla stock shot through the roof.
But then the share price entered a turbulent period. Why? Because reality is slower than Musk imagined, and it took a while for his seeds to bear fruit.
But they did.
Later, Musk realized a new vision was needed to spark further growth in Tesla stock price. And so he released Tesla’s second manifesto, entitled “Master Plan, Part Deux.”
This time he really dreamed big.
In his mind’s eye, Tesla would become an end-to-end energy provider. It would sell solar panels for power generation, batteries to store the power, and electric cars that would use the energy.
Boom. The TSLA stock price shot through the roof as Musk painted this portrait of Tesla’s future. It climbed back above the $200.00 level and even dared to cross the $300.00 barrier. Now, it’s sitting at approximately $343.00.
SpaceX is the biggest project on Musk’s plate, and it’s about to get bigger.
With one eye fixed on Mars, the company is ramping up its number of commercial launches, hoping to raise enough cash to reach the red planet. And things won’t cool down then, either.
At that point, Musk will likely have to deal with a SpaceX IPO.
By contrast, the biggest change on Tesla’s radar is the Tesla semi-truck. Till now, Tesla has only built personal vehicles, but it hopes to transition to all forms of land-based travel.
I personally don’t think that’s enough to keep him in the CEO position. Any auto expert could run the company in its current stage, freeing Musk to do what he does best: innovate.
If he does leave, there’s bound to be a crash in the TSLA stock price. But that crash won’t necessarily last forever because there is an existing model for dynamic founder/CEOs leaving their creations behind.
Bill Gates did it with Microsoft Corporation (NASDAQ: MSFT). MSFT stock is trading near all-time highs today.
Larry Page and Sergey Brin did it even more successfully with Google—now Alphabet Inc (NASDAQ: GOOGL). Their departure didn’t stop GOOGL stock from doubling in the last five years, meaning that Tesla stock could survive Elon Musk’s departure.
However, the transition needs to be handled smoothly.
There must still be an emeritus position for Musk—president, chairman, or even chief evangelist. Whatever the official title, his name needs to appear somewhere on Tesla’s “About Us” page.
If Tesla does that, then TSLA stock might be able to survive the shock of Elon Musk leaving the company for his other ventures. If not, TSLA stock will burn.