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Do Tesla’s Result Show The Problems With The Mercurial Elon Musk?

Tim Worstall
Tim Worstall trader
Updated 21 Jul 2022

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Key points:

  • Elon Musk has definitely driven Tesla to succeed
  • But there are issues, like Twitter and Bitcoin
  • Is there a point at which the mercurial Musk is too much for Tesla?

The Tesla (NASDAQ: TSLA) results are out and one comment is that they show the problem of having the mercurial Elon Musk running the company. Hargreaves Lansdown said “The bitcoin losses point out an important part of the Tesla investment case—its eccentric owner. While Musk’s impressive innovation has served the company well, his personal flair is starting to raise governance questions.” Both points are true, of course, but what matters is how we weigh them to try to come to a valuation of Tesla as a company.

It's probably true that TSLA simply would not have grown to the size it has without Musk having been there. After all, an awful lot of short sellers have been making that case – and losing their money while doing so – that Tesla simply would not be able to break into the mass manufacturing of automobiles. There's little doubt that Musk has been an essential part of it being able to do so.

On the other hand, buying a substantial stake in Bitcoin is an odd thing for a mass manufacturing auto company to do. It looks more like a whim of the CEO than a sensible long term decision. That the stake – at least, 75% of it – has now been sold down is seen as something of a derisking of Tesla. There's also that possible effect Musk's pursuit of Twitter has had on the Tesla price. He's had to – the bid is now withdrawn of course – sell some TSLA, also possibly plege more of it, to even make the bid. That might be thought to have affected the Tesla stock price as well. There's more analysis of Tesla's Bitcoin stake here, including possible effects of the sale on bitcoin itself.

Tesla stock price
Tesla stock price from IG

Also Read: How To Buy Tesla Shares

As to the actual Tesla results other than the bitcoin issue, matters moved in two different ways. Given that we already knew the production numbers we knew they were down. Disruption in Shanghai, with covid lockdown and so on. On the other hand Tesla was able to push up prices, meaning that profits came in higher than expected even on that lower level of sales. Total revenue, YonY for the quarter, was up 42% to $16.9 billion, net income up 98% to $2,26 billion. Those are, given global economic disruptions, good numbers.

Since then Tesla stock has seesawed around the opening price – up a little immediately after results, coming back a bit.

The thing about Elon Musk though is indeed true. It's extraordinarily difficult to believe that Tesla would have got to the size it has without him. For it has got to mass manufacturing size, something many thought it wouldn't. On the other hand there are those varied bitcoin and Twitter issues. Not just the takeover of course, but the sanctions from the SEC a couple of years back from misusing Twitter for releasing price-sensitive information. It's even possible that at some point Musk will need to be replaced – but perhaps not just yet.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.