People freaked out a bit at the end of this week when Tesla CEO Elon Musk tweeted, “Tesla stock price is too high imo.” I should rephrase that: Tesla shareholders freaked out a bit.
I’m offering no insight on whether the price is too high, too low, or just right — so don’t take anything here as guidance on the stock. However, a few things struck me from his statement and the response.
First of all, I immediately recalled Elon saying in an interview on CNBC in August 2013 essentially the same thing. So, I wasn’t all that shocked by his tweet. He doesn’t have a problem acknowledging when he feels like the stock price has gotten a bit ahead of the company. Unfortunately, it seems that CNBC has retired that video (or, at least, the embed no longer works), but here were his comments:
“I actually think that the value of Tesla right now is … I mean, the market’s being very generous, and they’re obviously giving us a lot of credit for future execution, so we’ll do our best to honor the faith the market has placed in us. … But I really feel like the valuation we’ve gotten, that we have right now, is more than, is more than we have any right to deserve, honestly. …
“We need to make sure we really knock the ball out of the park in the coming years. …
“Our stock price is obviously far too high based on historical financials, or even on current financials, so the value is very much based on what the future cash [inaudible] will be like.”
It appears that was Elon’s basic point this week as well — not that Tesla won’t eventually achieve more and deserve an even higher stock price (he has said as much many times), just that for what Tesla has achieved to date, it appears a bit inflated.
While that may be the case (who the heck knows?), one of the best arguments I’ve seen for the high stock price in the midst of this global coronavirus pandemic and economic shutdown is that there’s no really good place to park your money. Treasury bonds? No thanks. Real estate? Maybe not. An NBA team? Perhaps when you’re allowed to play basketball again. Airlines? Hotels? Amazon? Apple? Nothing is super compelling for many investors, but there is a sense among many that Tesla has an exceptionally bright future and is a good mid-term to long-term place to stash some cash. Well, I guess it’s obvious that’s what people have been deciding when you consider that Tesla’s market cap is currently double Volkswagen’s and Volkswagen is the second largest or even largest automaker on the planet in terms of volume.
I’m not saying it isn’t weird for a CEO to talk smack about his own company’s share price. I thought of tweeting, “Well, it looks like Elon has joined $TSLAQ. Odd times.” But, aside from figuring few people would see my tweet and it would be a waste of time, it’s important to not distinguish between people who somehow think Tesla is headed toward bankruptcy ($TSLAQ) and people who think the stock price has gotten a bit ahead of the company (Elon). There’s actually a huge difference between those two parties — something I’m sure you wouldn’t realize if I didn’t tell you.
Another thing people have noted and Elon has seemingly confirmed is that this tweet, as well as ones about selling all physical possessions (including houses), was at least somewhat meant to debunk unfriendly claims that he just wants the US to open back up because he’s a greedy, selfish bastard. Alongside that is the claim that all he cares about is the stock price, since his compensation is very much tied to how high the stock rises. I figured that was part of the reason behind these surprising tweets. Anyone who knows anything about Elon Musk, in my opinion, knows that he cares extremely passionately about the work he’s doing and probably doesn’t swim in gold coins like a certain duck — in fact, may care very little for his net worth. Who knows for sure how much he cares about his ranking among the world’s richest, but Tesla fans know that’s not what’s driving Elon on the shutdown stuff. There are plenty of other theories that make much more sense. As one final note on this part of the story, Elon also doesn’t like being perceived in what he considers an inaccurate (and negative) way.
It surely bothers him that many people think and claim that he’s a greedy billionaire who does what he does in business basically only for the money. The idea is ludicrous to him.
Reading responses to Elon’s tweet about the stock price, it struck me that I often forget that many Tesla fans and followers today were not following Tesla and Elon Musk years ago — in this case 7 years ago. Whereas that tweet this week immediately brought to mind his 2013 comments, a large portion of people had no idea he had said all that in public, to one of the largest media outlets in the country no less. It is perhaps wise to try to remember more often that even moderate historical context regarding Tesla may be helpful to many readers.
When you take that historical commentary into account, it’s easier to see that Elon’s honesty and openness sometimes just override what’s “normal” or expected of a CEO. While the societal crisis and a coming baby may indeed be causing him some mental-emotional stress, the commentary on stock price lines up fine with things he would say at other times as well.
By the way, in late August 2013, the stock price was between $140 and $170 a share. It was $701.32 at the closing bell on Friday. Elon’s comments about the stock price in August 2013 aren’t really relevant today, and his comments this week are unlikely to be very relevant (and may seem quite shocking) in 2027. Wow, it’s hard to even imagine where the company might be in 2027.
As before, the company’s value today versus in several years depends on whether Tesla can “really knock the ball out of the park in the coming years.” Elon’s assessment this week on whether the stock price is tied well enough to Tesla’s current and near-term financials doesn’t really matter.
