Business Insider Edition
Elon Musk’s personality represents an overhang for Tesla stock, and the EV company needs to break ties with Musk’s image in order to win back investors, according to NYU’s Aswath Damodaran.
Tesla was worth more than $1 trillion at the start of 2022 as investors saw a promising future of growth ahead for the electric vehicle company that was being run by what many considered to be a true innovator.
Investors attributed the “Elon Musk premium” as partly the reason why even though it only sold a fraction of the number of cars, Tesla was worth more than Toyota, Volkswagen, Honda, Ford, General Motors, and Mercedes combined. Today, Tesla is worth $345 billion, less than double Toyota’s valuation of $219 billion.
In recent months, Tesla stock has crashed more than 70% to levels not seen since 2020 as investors grow concerned about Musk’s ongoing antics as the new CEO of Twitter and his divided attention running Tesla, SpaceX, and Twitter all at the same time.
In order to win back investors, Damodaran, dubbed NYU’s “dean of valuation” due to his expertise in value investing, told CNBC on Thursday that it’s a double edged sword when a company’s image is so closely tied to its leader.
“It’s a danger buying a company that’s so closely tied to a personality that you’re no longer buying a company you’re buying a human being,” Damodaran said. “In a sense, what you’re getting here is a bet for or against Elon Musk.”
And that’s all well and good when the perception of the leader is mostly positive, but public perception can change on a dime.
“I think that Tesla needs to find a way to disconnect itself from personality, and that’s going to be tough to do because it is a company built in Elon Musk’s image. And once a company becomes equated with a person, you run all kind of risks and Tesla investors are facing those risks,” Damodaran said.
Investors are finally catching on to those risks as they push the Tesla board to reveal its succession plans in the event that Musk decides to focus his attention on his other business ventures.
One of Tesla’s largest individual shareholders has called for Tesla to start searching for a new CEO amid the volatility. Meanwhile, a Tesla shareholder in Iceland submitted a resolution for Tesla investors to vote on in May as to whether the board of directors should prepare and maintain a key-risk report, according to the LA Times.
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