Elon Musk Might Have Finally Flown Too Close to the Sun
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On Monday, Tesla lost 6.8 percent of its value when the S&P 500 fell by less than 1 percent on tariff fears—marking the sixth-worst day of the year for the stock. The causes of Tesla's slide were core issues to any electric car business: Elon Musk's plan to launch a third political party and his doubling down on insinuations that Donald Trump is, at the least, protecting pedophiles and may be one himself. ( The memes are hard to parse because, despite spending every day on his own social media platform, Musk is bad at posting.)
It's nothing new for Musk to create stock market problems for Tesla with his social media antics. Time flies when you're having fun, and it was seven years ago that the CEO caused a minicrisis by tweeting that he had secured the funding to take his electric car company private. (Technically, he is still supposed to have a lawyer review his Tesla-related posts , a directive that really should apply to all his posts, given how often his statements affect the company's stock.) But Musk's social media tantrums have been responsible for a couple of Tesla's worst days in the market recently. This latest one was only about half as bad as the day in early June when Musk's public meltdown over Trump led Tesla to lose 14 percent of its value in a day.
Musk appeared to back off for a time, and the company's stock rebounded. But now it's worth contemplating a question whose answer once seemed as if it would never come: Are we finally watching the ultimate act of self-sabotage by Musk? Have we reached the logical limit of the things he can say, and the people he can alienate, without compromising his position as perhaps the most powerful (and definitely the richest) businessman in the world? For a chance, it may be worth considering it.
Tesla is a silly company in stock market terms, even in the calmest of times. It trades at an enormous premium to what its underlying sales and earnings say it “should” be worth. But the stock has been doing this for the best part of a decade, making Tesla one of the most valuable companies in the world. You will achieve nothing by quivering “Bb-but the price-to-earnings ratio!” as its stock continues to trade above this atmosphere. It was funky when Tesla added $100 billion of market capitalization in one day because it got through one day of about 20 robotaxis not driving into pedestrians on the streets of Austin . All of the most popular broad-based index funds have a lot of Tesla in them now , and you might not like that this is the kind of thing that indirectly affects your retirement, but that ship left port long ago. When your retirement already depends a little bit on the price of bitcoin , it's hard to summon outrage about Tesla. It's difficult to even feel as if each month on the roller coaster of Tesla stock tells us anything new.
We may now be in the midst of the last lesson this ridiculous stock will ever teach us. Lately, Tesla has provided a fresh spin on the way political corruption moves the price of one of the market's most famous companies. It is the first stock in the S&P 500 to spend the better part of a year moving up and down intermittently based on the personal relationship between the president and the company's boss swinging from great to terrible. A cycle that had been propping up Tesla now seems as if it has broken forever.
You could tell the story of Musk's government service in pretty good detail just by looking at a chart of Tesla's stock since the election. The stock bounced by nearly 15 percent the day after Trump defeated Kamala Harris, when the market observed that it would probably be nice for Tesla that the president would be someone who had just benefited from nine figures of political spending by the CEO of Tesla. At this point, it was a garden-variety story of influence peddling. Analysts were bullish, and explicit, that Trump's being in the White House would mean tangible gains for Tesla's stock. As soon as election night, a well-known Tesla bull was on CNBC suggesting that Trump's win would add $40 or $50 to the stock price .
The stock slipped in mid-November, after Trump named Musk to a controversial role as the unaccountable spending slasher of the federal government. But it didn't slip too far, and stock rallied into December before pulling back slightly. It was trading at around $425 at the time of Trump's inauguration. After that, you know what happened: A significant chunk of Tesla's gains was based on political favoritism, and the stock fell because of political disfavor by half of the politically engaged people in the country. By March, the stock had lost nearly half of the value it had held in November. For a few weeks, Musk sold a line that he was getting back to business and focusing less on politics. A tenous peace with Trump held until Musk initiated the meltdown of their relationship in public in June, and now here we are. Musk had given back the corruption premium that Tesla's stock earned from Trump's win.
Musk is sometimes frustrating to Tesla's board of directors, because his eye wanders toward business and political projects that are bad for the company's stock. But I think that if I were one of those directors, I'd be more pissed off about this next sequence than anything the CEO has ever done. One June 4, the day Musk reads the fuse on his relationship with Trump, Tesla's stock lost 14 percent of its value and closed at $284.70. In the one month of trading days after that, the stock had gained back most of that day's losses, about 11 percent, to trade at around $315 at the beginning of July. Musk then gave almost all of that back in one day of pedophile-adjacent tweeting and threats to launch a (probably doomed) political party. He tanked Tesla's stock with social media fighting on Trump, watched it recover, then did the exact same thing. There's a point at which exhaustion sets in for the people watching this all happen, isn't there?
Monday was an especially bad cocktail for the company; it had notes of Musk being “distracted” (a problem for Tesla since his days chasing down the acquisition of Twitter) and the overwhelming flavor of presidential beef. One wonders how the board Musk nominally answers to has been processing these events. On the one hand, directors have usually bent backward for Musk, who still oversees a company that trades way ahead of its fundamentals. They wouldn't want him starting a competitive electric car company. But on the other, is it even tenable for Tesla to exist with Musk at the helm if he's on these terms with Trump? He has ensured Tesla's brand poisoning with a huge portion of the country, and that is unfortunately the portion of the country that hasn't been negatively polarized against electric vehicles . If Musk is the target of mean Truth Social posts from the center of the cult of personality that makes up the nation's other big political tent, then who will buy cars from his company? Europeans? Please . China? It turns out that no longer being cozy with Trump creates trouble there too .
That dog won't hunt. Though Tesla's board shouted down a Wall Street Journal report this spring that it had looked into finding a successor for Musk, it would be asinine not to poke around . Musk's interests in getting closer to Trump were always fraught for Tesla, because short-term regulatory favors needed to be weighed against alienating the likeliest Americans to actually buy an electric car . Now Musk has alienated the person who would grant him those favors, without doing anything to win back the people who would buy the cars. Masterful gambit, sir.
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