Are Elon Musk’s Purpose & Vision worth $56 Billion?
Musk has been granted 7% options of Tesla overall stocks as a bonus. Adding to his existing 13% he now holds 20%. Normal ESOPs grant CEOs between 5-10%, in many companies even less.
But even if we explain this extraordinary percentage excess with the fact that he's the founder and not only the CEO (which is a big difference), the absurd magnitude of $56 bn results from Tesla’s steep stock price increase since 2018.
That's the real question here: Is the market correctly reflecting Tesla's intrinsic worth or is it an anomaly?
Are markets always efficient in allocating prices? Or is it a typical case of irrational exuberance driven by hype, speculation, herd behavior and in that special case even manipulation by Musk himself (his statements and change of governance in terms of accepting bitcoin, etc.).
IMHO the valuation is totally inflated not to say ridiculous considering its profit, it's detached from any underlying fundamentals and financial metrics.
Ranked in front of a role model company like Toyota in terms of market cap is also more than questionable. Now you can say it’s a bet on the future (of course it is) and the technological leadership together with the Tesla brand is superbly strong and that's what the market is pricing.
In my view though considering the strong low cost competition from China (Musk’s biggest market), production and supply chain issues, quality and reliability concerns, Tesla’s competitive position is pretty fragile.
And I'm not so sure about the importance of the car in the future in general. Or let’s say at least, I find it utterly strange that you can become the richest man in the world (now second) with a car company in the information age, where everything goes towards intangible goods and services.
Henry Ford in the 1920s ok, but in 2024?
In today’s mobility ecosystem cars are not that central anymore and the importance is going down. Ecological trends don’t benefit cars either, even when electric.
Ok, Tesla has an ecosystem strategy and invests in drivetrains, battery technology, etc. and even its car in reality is a computer on tires, fair enough.
And Tesla will deliver the platform for future robo taxis according to ARK's controversial Cathie Wood. But contrary to what was hoped, autonomous driving is far away from being a reality in the near future.
Musk clearly is a visionary and purpose-led entrepreneur. I leave it open whether he can be seen as a leadership role model in general, but I think it's his extraordinary vision and purpose the market and his shareholders value with these $56 bn.
What do you think?