Lately, Tesla has been one of the stock market’s biggest losers. Since the beginning of the year, the company has dropped about $200 billion in market capitalization, making it the single-worst performing stock on the S&P 500. The spiral has come amid a storm of negative headlines—especially regarding slowing growth in electric vehicle purchases—a category Tesla has long dominated. Worse for Tesla, some of the most negative headlines were ones caused by Musk’s own erratic decisionmaking.
To discuss why Tesla’s stock is falling and what it might mean for Musk’s larger empire, we brought in senior reporter Esha Dey, who covers stocks for Bloomberg.
We also return to Elon’s alleged drug use. A necessary ingredient in his success to some, but insiders’ fear that Elon has become self-destructive and could eventually cause investors to rethink their beliefs.
Well, Elon Muski is now the richest person on the planet.
More than half the satellites in space are owned and controlled by one man. Well, he's a legitimate super genius.
I mean legitimate.
He says he's always voted for Democrats, but this year it will be different.
He'll vote Republican.
There is a reason the US government is the reliant on ed.
Elon Musk is a scam artist and he's done nothing.
Anything he does, he's fascinating people.
Welcome to Elon Inc. Where we discuss Elon Musk's vast corporate empire, his latest gambits and antics, and how to make sense of it all. I'm your host, David Papadopolis. This week, while Elon has been tweeting NonStop about quote unquote illegals at the border, we're going to take a close look at another crisis of sorts, Tesla's share price. It has plunged thirty percent since late December. Last week's decision by a Delaware judge that his record breaking fifty five billion dollar pay package was on lawful certainly hasn't helped matters. But the situation at Tesla, one of the most valuable companies in the world has been developing for years. Later on, we'll discuss yet another story claiming that Elon's drug use has material consequences for his companies. To talk about this, I'm sitting here in the studio with Max Chafkin, senior reporter at Bloomberg Business Week. Hey, Hey, Max, and Esha Day, a stocks reporter who covers Tesla for US. Hello, good to see you here. Okay, So we talked about Tesla stock a little bit last week, and over the past week it's just gotten worse. It is now at this point the single worst stock this year in the Nasdaq one hundred, and it's the worst out of all five hundred stocks in the S and P five hundred. Some two hundred billion dollars has been a raised from its market value. It fell yesterday, it opened lower once again this morning. Esche What is going on?
Well, a lot of things, But before I kind of unpack the many reasons that are driving the stock fall, I just want to take a step back and situate this stock move in.
A larger context.
So, as you pointed out, Tesla Schez are down almost thirty percent just this year, but this also comes on the back of a doubling or more than one hundred percent gained last year. The year before that, which was twenty twenty two, the stock crater sixty five percent. I mean, we can keep doing this and keep going back. But the point that I'm trying to make is that this is not an unusual move for Tesla Sches.
It's a very violatle stock. It's sort of all or nothing. To your point, there was a period, a twenty month period from March twenty twenty to November twenty twenty one where the stock rose on six hundred percent. Indeed, indeed, so you want to just give us that context, say, okay, let's not Let's step back here for a second and see it a little bit. For what is It's a volatile stock. So that's it, and the show we were done now.
No, no, not at all, but that's you know, it's good to understand that this is a volatile stock. Whenever the stock falls or whenever the stock rises, it tends to overreact either way. Despite that, and I think this is the most important point. Despite that, the kind of moves and the kind of value erosion that we're seeing in the stock this year is definitely historic, even for Tesla. The kind of two hundred billion value wipeout that we're seeing, it's definitely historic, even for Tesla.
So why is that happening? As I said, several reasons, But I think the two.
Main factors that investors keep pointing out to me when I'm whenever I'm talking to them for a while now are really stand out. So the first one is this slowdown that we're expecting to see in EV demand in twenty twenty.
Four max that we're already seeing in EV demand, right.
Yeah, absolutely, And also not only slow down an EV demand, but maybe some signs that in particular demand for Tesla is looking a little bit shaky.
Right And you were you were telling me earlier, Esha that if you're gonna play as an investor the slow down in EV demand, the one stock to make that play on is Tesla. There's no other way you're gonna You're gonna manifest. That's gonna manifest itself.
Absolutely, absolutely so. For and for any investor that's looking at like which is trying to play on the electric vehicle market even globally or let's say even US, Tesla is really the only proxy. This is definitely at this point it's not the biggest volume player. It has been overtaken by China's bid, but even then, like this is the most profitable EV company, pure play EV company in the world.
So if you're trying to make.
A bet on the future of the EV industry, trust Tesla's really or only proximity.
And to that point, so EV's were obviously super hot for a while time. Tesla, in large part because of Musk and his drive and what he did was the way to play that evs or the thing of the future. As EV demands slows in the US, right it is suddenly not the hot new thing. Interestingly, as Tesla's market value is plunged, several stocks have gone past it and become bigger than Tesla, and Eli Lilly is one of them, which makes sense right now, Eli Lilly a maker of these weight loss drugs. That's the hot new thing, not EV's.
Absolutely eve's back in twenty twenty twenty twenty.
One were the hot new things like that, they were the hottest fat everybody. No one had any idea of how this will play out. But that market has now started maturing and people are realizing maybe the overstepped a bit, as is something that happens with fat markets.
Just to say I don't think fad. I mean, I understand maybe buying Tesla stock was like fatish, but I mean a lot of evv's have been sold, and I think I think it's more a question of how big the market can get, right, Like, there were investors who were betting, essentially that it could grow a lot bigger than it has. And now it looks like you have a lot of people maybe who own one EV and one gas powered car or whatever, but but you're not gonna have this like instantaneous, overnight EV revolution. Like that to me feels like, right, that was the fad, that was the thing that everyone was sort of that was.
The fat, the idea that it was all just that the momentum was relentless, and that everyone in America within a matter of years was going to have nothing but EV's in their garage.
We can talk about all the things that may have fueled that, but like EV's have drawbacks, and people I think underestimated the drawbacks in terms of charging infrastructure, in terms of repairs, you know, with the Hurtz announcement, we talked about that a few weeks back. I mean, part of it had to do with the fact that, like, getting these things serviced is a pain, and particularly getting Tesla's service is a bit of a pain. And all that is, like Esha says, contributing to you, problems with demand.
Yeah, and to that point, Max, it's not just Tesla that's seeing a slow down in demand. It is also GM, it's Ford, It's all of them now. No, as you this morning, a Wall Street analyst downgraded Tesla stock to a sell i e. He is now recommending this as someone at Daiwa is recommending investors sell the stock cut pair back they're holdings of it. And it's interesting to me because when I look at the landscape across Wall Street and Wall Street analysts, Wall Street analysts tend to play a bit of this game where they're very very very reluctant to say, hey, sell this stock or sell that stock. They don't want to get sideways around bad terms with management. In the case of Apple, I'll give you a few statistics. There are thirty four analysts recommend you buy Apple shares and only six recommend you sell it. With Microsoft, fifty nine say buy zero, say sell with Alphabet, fifty three say by zero, say Cell, with Tesla it is now twenty one, say by twelve, say Cell, Why how do we understand and interpret this very disparate set of.
Fact Sure, you know Wall Street analysts are like they are not a very homogeneous bunch, though sometimes it might seem like so I can only sort of hazard some guesses as to water.
Yes, right, So the Tesla's.
Valuation, which is something that everybody is always talking about, that it's a really expensive stock, has definitely got to got a role to play. So even if we think that Tesla is one of the most interesting growth stocks in the US market, if you compare it with the other so called magnificent seven stocks, like.
We don't use that term. Okay, let's seven seven with the index of seven large tex stacks.
Let's say, yeah, the group of like the seven big a cohort of seven biggest of the tech stocks.
That's like still expensive. It's like expensive, you say it's expensive?
How for our listeners, how do you define expensive? What makes it expensive?
So there are many ways to look at whether a stock is expensive, I would say for a profitable company, for a company of Tesla stature, one of the best ways is to look at what people call the.
Price to earnings ratio.
So it's a way of comparing what a companies share, a company's share price to the profit it's making basically.
To the expectation of future profits it will.
Correct correct, So basically how much money you're having to pay as a shareholder to get to have a share of.
That problem of that of that income stream.
Matt, the growth story is just very tough with Tesla at this point because you know, this company, this company sells a lot of cars. We talk about all the time. It's a huge accomplishment for Elon Musk something like close to two million cars a year. But it's worth way, way, way more companies that sell way way more cars. You know, Toyota sells like some like three or four times as many or five times maybe as many cars as Tesla, and I think it's worth the market caps. I was just trying to look, but it's it's it's a little maybe it's a little more than half of Tesla's market value, you know, GM tiny fraction of Tesla's market value sells more cars. And of course, like there's been this growth story right Elon was going around in twenty twenty twenty twenty one. You know, the time of this, the kind of like hype around EV is saying, you know, this is going to take over all of transportation. Remember not just cars, not just personal cars, but it's going to come for taxis and we're going to remake our cities and your Tesla is going to be driving around and you know, driving your friends who don't have cars. It's going to be this like multi trillion dollar business. And Elon, you know, that's falling apart for two reasons. One is the downside around EV's we talked about. The other is that the whole robotaxi thing has just sort of like failed to actually come about. And so has a new story, right, which is which is optimist and AI and he's again trying trying to find a new fad to essentially attach Tesla to a new growth story. And I think for a bunch of different reasons, it just hasn't been as successful. I think there's like a formly once you know, for me twice thing going on perhaps with some investors. You know, also you have these antics and you it just kind of like the idea like there were there was some credibility to the self driving story whereas optimists, I've watched these demos, right, you see guys like Wheel the thing on stage. It doesn't look like, oh, this is about to come from my job anytime, right, So it's just hard. It's just hard to like believe it. And then and then, as Esha's saying, like, you look at the market cap, right, it's pretty big for a company that only sells sells less than two million cars.
Well that when it lost two hundred billion dollars in market cap this year, that two hundred billion it lost in market cap. It still has a market cap of nearly six hundred billion, but what it lost alone was greater than the market cap of four GM and all these other companies combined.
See. I think that that's exactly what I was trying to get to.
Why is a test company of Tesla's side size having so much of polarizing views among Wall Street analysts? And this is the heart of that kind of that conversation. Is it a car company, is it a tech company? Or is it like a weird amalgamation of a car and a tech company? And I think that question has not been solved yet. So when we look at the Wall Street analysts who cover this stock. So for like for the other six big companies, it's it's largely analysts who cover the technology space.
Right for Tesla, you would.
See it's a mix of company analysts who cover car companies, which are essentially value stocks. That's how so they use a different way to view these stocks. And but then there are also analysts who really cover tech stocks, and in some of them think Tesla is overvalued as well. But that's where this kind of weird polarization between us feelings.
We need to talk about Elon Musk, right, because it's not just about you knows or whatever. It's it's the fact that he is the thing that separates Tesla from being a car company versus a you know, ils crazy growth stock, and so I think that is also.
Yeah, that's a really a good way to frame it. Right, Elon Musk walks out the door, and what Wall Street investors currently value as this incredible tech growth stock. From the moment Elon Musk closes the door on Tesla, it absolutely becomes just a car basically becomes a car company.
You could also imagine a situation where they bring in I don't know who, Adam Newman comes in and you know, he's like and he's he's energized, he's got the Don Julio and like he's able to spin a story that maybe it's not as good as like.
The goes to one hundred, right, But but you.
Could imagine a situation where another tech executive, like, it's not it's not exclusively Elon Musk, but I do think he's a big part of this, and you lose him and it gets just way harder to tell that story.
Let me take that for a second, esh and go to the other side of it, which is the short sellers. Elon Musk despises short sellers, the people who bet against the stock, bet that his stock or any other stock will decline in price. Have they, as Tesla has plunged this year, have they raked in and made a big fortune.
Not really. I mean, let's look at the data and what that tells us.
Right.
So, there was a time, you know, even before Model three was launched, and around the time when Model three was being launched and Elon Musk was going on and on about his so called production hell. Around that time, Tesla's short interests used to howe, I would say around thirty percent the.
Short interest is the percent of the total s momber shares out there that people have borrowed to then turn around and sell.
So I guess a simple way to look at it is like, how what percentage of investors are are kind of betting against the stock?
Okay? And it got to his highest thirty percent, which is a pretty high number, very high, And today that number is what.
Around three percent, and it hasn't really budged from that like you would see like small spikes and drops, but it really has been hovering around that three percent.
So three percent in date is pretty low. So basically that means that when the stock soared in twenty twenty and twenty twenty one, he gave the short cellars such a beatdown. And I believe in twenty twenty that they lost thirty eight billion dollars. That's right, the short sellars that you're in, I mean that kind of that. He just scared them all out of the market. So the David Einhorns, the Jim Chains is even Bill Gates right famously was sure they all get to bet.
I mean it's possible that they all have or some of them have short short or small shot shorts.
They own short shots.
Now, well, you don't want to get there, not only when you lose money on Tesla. He insults you on top of that, so you can take a huge loss, and you know he burns you on Twitter as as he does to all these guys when they.
Did you buy a pair of the short short.
No, Santa did not bring those to me?
Right, Okay, all right, Max? How does this decline plunge in Tesla's value? Effect is broader empire? I know you said earlier on there's a bit of a halo effect, But for instance, do I think we know that in twenty twenty two, at some point he was considering financing his acquisition of Twitter by using Tesla as collateral. It was going to be one of the biggest such loans in the history of the world. Mercifully for him, I think he backed away from that idea because if he had, he would be feeling a lot of financial pain. Right now, are there other knock on effects on the rest of the of the Musk constellation?
We talk about this all the time, But like, this is a very rich man who does not have like a huge I mean, he's got plenty of cash, but like he doesn't have like just buy random failing software company for crazy over valued prices cash, Like you can't make a weed joke and an acquisition every day if you're Elon Musk without essentially selling some Tesla stock or borrowing against your Tesla stock. And and he's he's stretched, right, he's got he's a major shareholder of SpaceX, you know, major shareholder of Tesla would like and and And that's part of the reason he wants more. He needs It's he's saying it's partly because of control. But I think it's partly also because I think it's weird to say this, But I think he may be feeling the pinch a little bit.
The world's richest man, the world richest person is is is poor.
I mean, so when you're trying to start all of these companies that are hugely capital intensive, right like these are not. This is a guy who brings Silicon Valley you know, no how or whatever to capitally intensive businesses. But that doesn't mean they don't they don't cost capital and neuralink of course, like even if they even if this patient is still doing well, which we haven't, we haven't heard anything about that.
True lately.
But but in any case, like that's a that's like a ten year project. You have this like boring company, this like massive infrastructure thing. You know, the sort of best economics are with X which, like I mean that kind of tells you how you know that he needs a lot of.
Cash, right, So they're both capital intensive and the return on investment tends to often take a long time.
It also gives him a lot of power because if he's capable of self funding things like that, that generates interest from investors by itself, because all of a sudden, it's like you could either join me on this crazy ride with Neuralink or whatever or Boring Company or XIAI, or you could or I'm going to make all the money. Like it gives him negotiating leverage having this huge water cash.
Now, we need to talk a little bit about drugs, as one does on this show, and the board and corporate governance and Elon's relationship with the board, the Tesla board, the Wall Street Journal Max for the second time and about a month has come out with a story that they clearly have put a lot of time, effort, and energy into spelling out the nature of his drug use and his interactions with the board. What were your high level takeaways?
So we talked about the last piece, and I think this piece has some things in common with that, Like this is the Wall Street Journal, really respected news organization, kind of going at what has been, i would say, kind of like an open secret right in Silicon Valley, which is that Elon Musk parties. And there are a lot of stories going around and have been for years from from sources that range from reputable to like other celebrities talking about accusing Elon Musk of like doing drugs with them as Alien banks during the four to twenty funding secured fiasco alleged that that Elon Musk was on LSD. She's kind of been a continual critic. What's new in this story, I would say, is the suggestion that the board is very worried and that certain Tesla board members. The story also says that some board members have done drugs with Elon Musk and that they've been pressured to do drugs with Elon Muster.
It's kind of.
Funny because it's like awkward to like say no to when he passes the bong or whatever. It's like pretty hard to say no. But but I mean the really what's what's really interesting is the is the suggestion that some board members wanted him to go to rehab and that and that if that is true.
Larry Ellison, that Larry Ellison, yeah, a close friend of Elon Musk, very important now I probably his most important, uh like powerful ally.
According to this Wall Street Journal story, invited him to Hawaii, where Larry Ellison lives, to to like dry out. Now I should say Elon Musk has denied this, as he often does, right, He went on Twitter and kind of ragged on the story with his fans. He said, number one, no one ever used the word rehab to him, and that he went to visit Larry Ellison, but it was just a a family trip, Esha.
One of the things that drumped out at me in the piece was, in addition to the drug use, that's got Max so fascinated it is is the super close ties, all the complex web of businesses that Musk has with members of who are supposed to be independent on the board. On the Tesla board. We know from last week's Delaware court ruling where his pay package was stinged. One of the things that the Delaware Court judge ruled was that you know, hey, Musk was just too cozy with the board, and the way this enormous pay package was struck was just not kosher. How do investors look at those Musk ties with his board.
So questions about Musk's leadership are not something that are never discussed, especially when I'm talking to investors. But I also want to point out that investors who love Tesla because of Elon Musk kind of take it in this stride that there are drug use. It's kind of, as Max said, that it's an open secret. I mean, Musk has been reported to not be the easiest person to work with it, so that that does create.
It's like they're rolling Stones, Like if you found out that the Rolling Stones were using drugs before there shows. Yeah, that seems like it might even It's not only that something you would expect, but I think there's a sense, including amongst some Tesla board members, that this drug use might be helping him, right, Like you have Antonio Grassius, who is a close friend of Elon Musk, you know, donating money to institutions to study psychedelics. These these are people who think that psychedelics might be the humans in.
Historic should be rising on stories of this drug use. No, this is bad.
It's not good even in your own personal life. You know that when like people start talking about like oh so and so needs to like dry out or whatever, like it's it's gone, probably gone past the point of of just like a party or two. But again, it's hard to know because this is coming from anonymous sources. We don't know who is who is speaking to the Wall Street Journal. Because we don't know, it's a little bit hard to say, like, are these just you know, a handful of isolated incidents. Although he hasn't specifically denied every allegation, he said he's clean.
I can't get you two to stop talking about drugs. I want. I keep trying to push this conversation to one which the much more sober topic of corporate governance and his ties with the board, which I know you can't you can't come to a good conversation about drugs. But Max, I guess I wonder as I look at the way he's forged these incredibly tight ties with just about every member of that board, it just keeps bringing me back to an episode in a period, an incident that I think, you know, very well, which was when he was ousted in that coup from by the board at PayPal.
Absolutely. Yeah, So so Elon Musk and I've written about this a bit but like he and others have as well. But yeah, he behaved in a out of control way in terms of his management style and so on, and was board members were pressured by his executives and he was pushed out. But you know, a lot of changed. That was, I believe in two thousand and one, and.
That was a pretty scarring experience for him.
It was when he says, oh, I need like more Tesla stock because I don't want to take over. Like I think part of that is he's just trying to like get a big payday. But I do think there is some real part of his psychology that where he is actually worried about being pressed, you know, pushed out, and he has for years had this Some of the chip on his shoulder he has comes from this PayPal experience. I will say that, Like, I don't think the the Tesla investors who are worried about Elon Musk's drug use are the ones who think it's a car company. But if you think that this is like a crazy awesome. You know AI, you know robot thing. You want him to be in charge, you want the cozy board, you're you know, like Matt Levine made a joke about in one of his columns a couple of weeks ago that Elon Musk could like put a bag of ketamine on the boardroom table and the board would say, yes, sir, that was a very good decision if you believe he's a creative genius, kind of like the mc jagger thing. If I told you, you know, mc jagger is really responsible for a lot of the decisions that the Rolling Stones are making, you wouldn't be like, oh my god, that's horrible.
You'd be like, great, he's a rock star. He should be.
And it's the same thing with Elon Musk. And I'm not endorsing this line of thinking. I think it's like, you know, it's a lot of things put together that raise serious questions.
But like the believers believe.
That Elon Musk is a kind of singular genius.
Who should be left alone.
Let's call it quits for the day. Thanks for listening to Elon Inc. Thanks to our panel, Eedha Max, thank you great to be here. This episode was produced by Stacy Wong. Naomi Shaven and Rayhan Harmanci are our senior editors. The idea for this very show a so came from Rayhon Blake Maples handles engineering, and we get special editing assistants from Jeff Grocott. Our supervising producer is Magnus Henrickson Huge thanks to Joel Weber. The Elon Inc. Theme is written and performed by Taka Yasuzawa and Alex Sugiyira. Sage Bauman is the head of Bloomberg Podcast and our executive producer. I am David Papadopolis. If you have a minute, rate and review our show, it'll help other listeners find us. See you next week.