I kinda wonder what will happen to TSLA if Musk were to just _walk away_. Which, to be clear, he can. And whether that'd be a net positive to "Tesla's largest retail shareholder".
Tesla is more than a car company, selling solar, home batteries, and auto charging infrastructure. That said, every company at some point has to be valued intrinsically.
EVs sales is still the lion's share of revenue, but any of these divisions could be a stand-alone business. (maybe not the solar panels, which hasn't done well at all)
"By 2030" is a long time away for a company that was close to bankruptcy about 6 years ago - anything can happen. Full-self driving is also 5 years away if you believe Musk - it's been 5 years away for the last 10 years, though. The first article you cited is basically quoting Tesla marketing material.
Here's the objective picture today (as of end of 2023): TSLA has $74.2 billion in revenue from being a car company. TLSA has $4.8 billion in revenue from energy production and storage. Gross profit is the same story for the two segments - $16 billion and $1 billion respectively. Margins are not dramatically different.
A hard to attain science and engineering task is often 5 years away for a long time until 5 years before it is actually delivered. Unlike building widgets building something never done before entails an awful lot of hard to estimate work. Anyone doing software engineering should be familiar with this.
The “5 years for 10 years” meme seems to be confusing a lack of accuracy when giving a precise answer to a difficult to estimate task for either foolishness or fraud, or perhaps both. To me it reads like every software and research estimate I’ve ever seen - a sliding estimate on something you know will deliver but hard to pin down exactly all the unknowables are worked out.
A more honest estimate is "we don't know how long it will take." Guessing that things are 5 years away is borderline fraud when you have no idea how long it will take (eg an uncertain, massive R&D project).
To be fair to you, it was actually "next year" for about 5 of the 10 years that Tesla was promising self-driving, which is a different story (likely actually fraud).
Did you check Tesla valuation to put up against those revenues ?
Even after the recent plunge (it's only a beginning) it's valued at $460B.
$6-12B of best case projected revenue, with low margins, by 2030 is meaningless for a company with this kind of valuation, to say it politely.
Tesla valuation was justified by a myriad of promises from Musk, and analysts that started to believe that sales of EVs will grow by 50% each year for the next 10 years.
Market cap isn't the same thing as revenue. Their annual car revenue is somewhere in the neighborhood of $100B a year, which still is the lion's share, but anything that generates 5-10% of revenue isn't something to ignore, especially when you have a couple of those. Apple's Mac sales are only 15% of their iPhone revenues, for example.
I'm not a fan of musk, but I think the fundamentals have turned on Tesla. Cheaper chinese EVs are coming out in two of the biggest 3 markets and traditional auto makers are catching up in the US. A replacement level CEO would probably be making similar decisions.
> Cheaper chinese EVs are coming out in two of the biggest 3 markets
I expect this to be ephemeral due to geopolitics and the local politics. Chinese domestic consumption is lackluster compared to their production and they are “product dumping” on the rest of the world that have domestic manufacturing and varying levels of preexisting market protectionism. That and China’s belligerent geopolitical alliance increasingly clashing with the West and in their regions means that stiff(er) tariffs are imminent.
Outside of maybe the UK, I don't think Europe is nearly as dead set on the adversarial relationship with China and you can't buy retail Chinese EVs right now in the US.
The demand reduction is also a problem for Tesla.
But one thing Chinese EV companies have is existing products in the lowest market segments. Tesla is giving up on a car cheaper than the 3 and I don't think that's a particularly unique Musk decision. American public companies are allergic to low margin products.
The US is only really deploying broad sanctions on technology that might have applications in military and security competition. And sanctions are proving hard to really enforce if the entities involved never use dollars.
EU defense and government contractors might not have a lot of agency, but plenty of other businesses do depending on the country.
> I don't think Europe is nearly as dead set on the adversarial relationship with China
Market protectionism is sufficient to provide pushback on Chinese product dumping in Europe in the medium term. However, as the global order deteriorates and countries have to pick sides most of the EU is unlikely to choose to align with a Russian ally.
They've been extremely selective in their targeting of Chinese firms accused of selling weapons to Russia. And last year Macron directly said europe has no interest in backing the US's position on Taiwan. I think as the global situation deteriorates, they are likely to want to focus on situations closer to the continent. I haven't heard if they are planning on stopping BYD from opening a factory in Hungary.
Opening a factory is a different matter. If the factory contains significant capital (ie isn’t just glorified assembly) then much of the manufacturing capacity is domestic as is the labor which is a method of avoiding tariffs that host countries tend to favor. The calculus is different at that point and could only affect the imported parts or raw materials if applicable. In a pinch such manufacturing can be nationalized and repurposed.
Most countries don’t have enough domestic auto production to care enough not to buy cheap Chinese EVs. Most people don’t think about politics when they can buy a nice car for $20k.
> Most countries don’t have enough domestic auto production to care
Countries without domestic production are also not major consumer markets, and when aggregated into major trading blocks like the EU their most influential member states do have domestic production and a strong protectionist bent so I expect they’ll also be strong armed into a protectionist umbrella. It also makes sense for Europe as a whole to not have its domestic production product dumped into oblivion as globalization crumbles.
That really isn’t true. Australia is a major consumer market, SEA has money to buy things even if they don’t make many cars outside of maybe Thailand. Ceding the car markets of just the non major countries is enough to create huge waves in the industry. The EU and the USA can lockdown its market with Japan, but that’s about it.
Australia is more than nothing, but a country with 26 million people and about 1.2 million new car sales annually isn’t tipping the scales of the global market too much. They’re also geopolitically aligned with the USA so the medium to long term outlook is negative for China trade relations.
> SEA has money to buy things even if they don’t make many cars outside of maybe Thailand
Every region has money to buy things and their business isn’t worthless, but SEA isn’t a big consumer market yet and isn’t going to be making up for the loss of/reductions in the big consumer markets. There’s only so many sales that the region can absorb even if we don’t factor in the fact that the region is adjacent to and frequently the target of Chinese military belligerence recently and for centuries. There is increasing regional geopolitical alignment with the USA albeit at arms length.
We definitely aren’t making enemies in SEA, but we are not close enough friends yet that they are willing to take a hit on getting cheap cars from China. Australia also, they are basically the only country that will follow us anywhere to war (eg Vietnam), but even they will buy BYD over Ford if the price is right.
1. Musk has destroyed the brand for many of their potential customers (who tend to be "liberal")
2. He no longer will force the company to pursue foolish distractions like the CyberTruck.
Their unwavering belief that Musk’s shitposting on Twitter will somehow affect anything IRL outside the increasingly insular US based neoliberal bubble.
If I knew when Musk was going to announce he's immediately leaving TSLA, I would. Stock would pop 100% within seconds. But that would be insider trading.
"I kinda wonder what will happen to TSLA if Musk were to just _walk away"
Merge with Toyota, sort out reparability issues, slap ten year warranty on cars and put up prices 15%. Dominate the profitable middle of the market as production costs fall and mint money while everyone else is left scrabbling at the bottom of the market.
I think, at a $55B price tag, yes, it would be a net positive for shareholders.
I think the other question is how likely he would be to walk away. I think at $0, Musk would likely stick it out at Tesla, since so much of his net worth, ego, identity, and brand is locked up in there. In other words, this seems like a bluff.
He has twit x and space x.
That should be enough for his identity. And he wouldn’t be forced to sell his Tesla holdings.
He’s been threatening to take his bat and ball and go home for a while. I’m curious how it would go.
It could actually be good for Tesla to be freed from his whimsical decrees (a friend of mine works there and his mercurial nature gives the company whiplash) and it could be good for him to think he has to start something new. He seems to think he can do a lot of good ai work. Maybe he can.
If history is any indicator, he seems strongest at mid-stage companies. He didn't start Tesla. He isn't doing well there right now (or Twitter, for that matter). He's too erratic for a mature company.
But he did an awesome job taking Tesla from the $M to the $B stage.
Any company at that stage would also benefit from the visibility he brings. For smaller players, any press is good press.
First of all, he’s not going to walk away. He can’t. He knows if he does the stock price will drop and his net worth will drop and given his mess in Twitter/X it’ll further screw’s him up. His entire thing about this is so that he can maintain his richest person in the world status, nothing more.
So, no, he’s not really walking away.
But, even if he does, depending on who they get, it might be a net positive for Tesla in the long run.
Makes room for JB Straubel to return. Roll Tesla up with Redwood Materials and keep scaling up with an adult having both technical acumen and empathy in charge.
Musk is the soul of Tesla for better or worse. Tesla currently has a market cap 10x greater than Ford ... if Musk leaves, sanity returns and Tesla would drop dramatically.
Musk has done well with Tesla historically. But by dropping the plans for the low cost Tesla and pushing the Cybertruck, and focusing most of his time on Twitter, it doesn’t seem wrong that people are suggesting Tesla would be better without him. The stock is below its 1 Year low and if the losses keep up at the same rate they have for the next 2-3 weeks, and it seems like they will given the dismal earnings call and consistent bad news coming out, such as the physical recall of all Cybertrucks, the stock is likely to trend down to at least its three year low.
If you’re comparing Jobs in 2005 to Musk now, you’re saying the Cybertruck is Musk’s iPhone. The thing looks cool (I think, very subjectively), but has been a pretty big failure.
Musk, who was awarded 5.27 million stock options in 2012 tied to Tesla operational and market value targets, has achieved six of the 10 operational goals to date
Hedge funds were shorting the hell out of the stock.
Numerous articles that Tesla was going under, etc.
He delivers on the ridiculous targets, takes home a massive windfall.
Now investors want to reneg? They don’t think it’s fair?
Seems a bit like they regret agreeing to the original deal.
If you read Chancellor McCormick's ruling, the court found that most of those targets were not anywhere near "ridiculous," they were pretty much expected given the way Tesla was going. Tesla expected to hit most of them in 18 months or less.
Also, the court invalidated the pay package, not the board or the investors.
Now suppose that you are a huckster CEO. You founded your company and hired your board of directors, and most of them owe that sweet gig to you. You have them give you a sweetheart deal on your pay package - they owe you after all, and you're a good guy so you deserve it. You put it in terms of stock price numbers because you're pretty sure you're going to hit those, and it makes the pay package look sort of fair. They obviously don't push back on your requests. They are grateful to you for putting them on the board.
Then they take that pay package to the shareholders and say "we fought him hard, but we have to give him a shit load of money to keep him." The shareholders think, "gee whiz the board is looking out for us and we love the CEO, which is why we own stock in this company. This must be a fair price because he's such a good guy." The shareholders think the deal is fair and they vote to approve it (rather than sending the board and CEO back to the negotiating table).
That is closer to what actually happened here. There is a CEO who set his own pay package based on internal information that the board may well not have had, and there is a board of directors who pretended to have negotiated with him when they proposed the deal to the shareholders, when they really didn't do anything of the sort.
This isn't "you agreed to a bad deal after a negotiation" - this is "you were tricked into signing the most ludicrous deal your counterparty could construct." The former is when you put on your big boy pants. The latter is when you sue the person who defrauded you (and you win).
The board is not hired by the CEO. Shareholders elect board members, or for shareholders who are large enough, they appoint them. Sure, Elon can say "hey, I want this board member" and the shareholders can do with that as they will, they are under zero obligation to select them.
Grateful he put them on his board? Did you see who these people are? Titans of industry many of them. Tesla was a tiny company everyone thought was going bankrupt at the time.
Now you might say "Shareholders were hoodwinked". Tesla is dominated by a few large investors (Vanguard, T Rowe Price, etc). This is not a 60-year with a beer in his hand who bought a couple shares, these are large institutional investors with massive teams who do due diligence on their investments, one can't claim they were we "hoodwinked" or "misinformed". They had every opportunity to select board members who represented their interests.
And not to mention - his pay package is public information. You yourself could go on sec.gov and look at it.
"Elon will receive no guaranteed compensation of any kind — no salary, no cash bonuses, and no equity that vests by the passage of time. Instead, Elon’s only compensation will be a 100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of our stockholders do extraordinarily well. The award consists of stock options that vest only if Tesla achieves specific milestones, which if fully achieved would make Tesla one of the most valuable companies in the world with a market capitalization of at least $650 billion — more than 10x today’s value."
The compensation agreement was back when the stock was $20/share. The stock price was 15-20 times larger at peak. He took at $65B company to $650B, creating $590B in wealth for shareholders. He got $50B.
Funny how the only commentary when the pay package was agreed to was "If Elon hits these aggressive targets he'll be in for a big pay day, but too bad Tesla is running out of cash".
I think you have the wrong idea of what happened, and you should consider reading McCormick's ruling and the trial records if you want to understand what actually happened.
Regarding board composition: The board of directors of a company is elected through a process that involves nomination by management, and then an approval of the shareholders. An abstention in this vote is treated as a vote with management. When management owns 25% of the votes in a company, it only takes a few abstainers to keep their butts in the seats. Board elections are also very slow, with a few directors being elected every few years, so it can take 10 years to completely replace a board.
Tesla's board of directors is not generally comprised of "titans of industry" but of people who owe Musk their success - are you reading the same list that I am? "Titan of industry" Kimball Musk? JB Straubel whose only accomplishments are Tesla-related? Or are you referring to nepo baby James Murdoch? Or the two VCs whose firms are only successful because of an early investment in Tesla?
If you want to see a board comprised of actual titans of industry, look at Google, Nvidia, Meta, and others.
The board also said, during the process of setting his compensation, that it was more of a "collaboration" and less of a "negotiation." And Tesla's internal projections suggested that the company would have hit most of those "aggressive" targets with a potted plant as CEO.
Just read the primary sources relevant to the case, and not just Tesla's statements. Suffice it to say that most of the world, including all the people who matter, disagrees with your read on the situation.
Oh I've read the decision and understand why the court decided what they did. It just doesn't doesn't seem like that strong of an argument.
And some of the criticisms of independence seem weak. "Known each other for 15 years?" I mean if I meet someone in 2008, may grab lunch a dozen times in between, I "know them". Am I beholden?
And titans? CEO of 21st Century Fox? Was he "hoodwinked"? And some of these people sat on the board for years, received compensation through stock grants, and the court says "they made $X million, so must be beholden to Musk". Does that mean boards need to be recycled every time they get paid lest they become "beholden"?
But that said, the court's decision was about the negotiation.
Shareholders still had a choice to approve the compensation package. In fact, for institutional investors, it was their fiduciary duty to do so. So your comment about the "abstention" just gets to that point - either shareholders decided they didn't care (ok) or they delegate their decision to the board (ok) or were negligent in their duties.
And the court's decision hinges on the idea that Musk was a "controlling shareholder", while only holding 21% of shares.
The courts will decide what the courts will, but the complaint comes across as "I never thought you would hit those targets, but now that you have, I want to reneg". I mean had Tesla gone belly up would they have complained about the compensation package?
> that most of the world...disagrees with you take
Well thankfully their opinions, like my own or yours, don't really matter, am I right?
We'll see how the appeal court feels with this judge's opinion of "This decision dares to “boldly go where no man has gone before,”2 or at least where no Delaware courthas tread."
I am not aware of a ruling of the Delaware chancery court ever getting overturned. They are good at what they do.
And Delaware has ruled on and struck down CEO pay packages before. This isn't uncharted territory.
I also think it's clear that you're confused about the legal structure here, and you probably should read some more things about the case given your interest. Shareholders have no fiduciary duty to do anything, and nobody is saying that the board was "hoodwinked." They were aligned with Musk on this when they should not have been, and worked against the interests of shareholders. The board is supposed to have a fiduciary duty to the shareholders, which they apparently are not taking seriously. The CEO reports to the board who reports to the shareholders, not the other way around.
> And Delaware has ruled on and struck down CEO pay packages before. This isn't uncharted territory.
The judge literally said it's unprecedented. That's why I quoted it.
> Shareholders have no fiduciary duty to do anything, and nobody is saying that the board was "hoodwinked."
Institutional investors have a fiduciary duty to their investors. Again, the largest shareholders were massive financial firms who represented millions of shareholders.
They absolutely do have a fiduciary duty to fully evaluate a CEO pay package and use their very significant voting power.
The only possible reasons they voted for it: a) they agreed with it, b) they didn't care or c) they failed to uphold their fiduciary duty.
Do note that the pay package passed with 73% of shareholders (who voted).
The stock rose dramatically during pandemic because of retail investors and a cult of personality. The underlying business did not justify the price rise and the PE ratio exploded.
With maturing electric market and profits, the PE ratio has come down but still reflects an enormous growth potential which seems unlikely for a manufacturing based company vs software.
But you would argue the incentives were to increase the stock price, and all his tweets and stock manipulation shenanigans were aligned with how the board incentivized him, even if what they expected was him to improve the business and increase value vs “guerilla” marketing and cult-ivation of investors.
>The Court found that the stockholder vote approving Musk’s Grant was not fully informed for two reasons:
>the Proxy inaccurately described key directors as independent, when several of them had extensive personal and professional relationships of long duration with Musk, including owing much of their personal wealth to Musk;
>the Proxy misleadingly omitted details about the process by which Musk’s Grant was approved, including material preliminary conversations between Musk and the Compensation Committee chairman, as well as Musk’s role in setting the terms of the Grant and the timing of the Committee’s work.
>In addition to the process of approving the Grant, the Court considered its “price.” “The Board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?” The Court concluded that it was not for three key reasons:
>Musk already owned 21.9% of Tesla, which ownership stake gave him incentive to push Tesla to grow its market capitalization even without the additional compensation;
>There was no risk that Musk would depart Tesla without receiving the Grant, nor did the Board condition the package on Musk devoting any set amount of time to Tesla;
>the Grant’s performance conditions were not, in fact, ambitious and difficult to achieve.
The board prepared the package and shareholders voted on it. Most of the targets were hit. Then an activist investor sued claiming that the board is beholden to musk and did not disclose that. The court agreed. Before a plan to vote on moving to Texas, the deal is now up for vote again with the court ruling attached.The stock price is also now below some of the targets previously achieved.
If you are a shrewd investor, you have to balance the impact of the options on your assets vs the signal you send to not just musk but any future CEO. But realistically, shareholders probably don't believe news that Tesla is going under, know that he rarely hits his goals for getting to market, and probably liked musk's leadership when the stock price rose.
On one hand the judge admits the company was teetering on insolvency, and one of the most shorted stocks, then turns around and says generating $600B in company value was “not ambitious or hard to achieve”.
She also questions whether Elon was really necessary to the performance of the company.
Some of those metrics were already well within normal forecasts, meaning that they would have been hit simply by overall economic growth not specific to Tesla.
And Musk engaged in several acts of fraud to make sure the stock price-based metrics were hit. Or did you also forget "funding secured"? Or the numerous tweets that FSD "will be available this year"?
The deal was invalidated, in part, because the court found that the committee with whom it was “negotiated” were not, in fact, independent of Musk and that the shareholders were misled on this point.
Which makes the description of the act as a “negotiation” somewhat misleading.
But it's odd, the end results of the "negotiation" are public. So regardless of how the negotiation (or not) happened, the end results (pay package) was in front of them in black and white to decide on.
It was pretty straightforward - if stock price hits X, Elon gets Y. It even says "Elon will own 12% of the company if all stock vests from hitting $650B in valuation".
It even has a nice bar chart showing how much Elon would make if he hit the highest tier - CEO Value Realized ($B) - $55.8
You have a point, but on the other hand "this was negotiated by an independent party" is one part of what was in front of them, and may've influenced the decision.
Generally the courts don't have separate rules for "billionaires" and "ordinary people".
It would be interesting to see your response when a court makes the same decision for an employee pay package (which is what this was - Elon was an employee of Tesla).
A slightly off topic and probably naive question: the article lists the top "institutional holders", starting with "Vanguard Group", "Blackrock Group", and "State Street Corporation".
Are these institutions that are holding Tesla stock on behalf of mutual funds or ETF's that they then resell to the public? Or are these direct corporate investments? Or something else?
More generally, who votes the shares that are held by these institutions? Does it differ depending on the purpose for which these shares are held? If it's held as part of a fund, do the owners of that fund get to decide, or does the management?
It's funny how a couple of days, the Teslarati weren't worried about this, and assumed the largest shareholder blocks were planning to rubber stamp this, "and after that, it only needs 10% support".
