The billionaire is the main key to the success of the manufacturer of premium electric vehicles.
Elon Musk is undoubtedly the architect of Tesla’s (TSLA) – Get Tesla Inc. Report success.
Investors are acknowledging this by placing enormous faith in the electric vehicle maker whose promises of becoming a tech empire have made it the world’s sixth most valuable company by market capitalization just behind Apple (AAPL) – Get Apple Inc. Report, Saudi Aramco, Microsoft (MSFT) – Get Microsoft Corporation Report, Alphabet (GOOGL) – Get Alphabet Inc. Report and Amazon (AMZN) – Get Amazon.com Inc. Report.
Investors appear convinced that as long as Musk is in charge, Tesla will continue to disrupt the automotive industry and beyond technology. Any sign that the billionaire may be focusing his attention and energy less on Tesla is likely to send investors into serious fright.
This is what happened in the past three months with the launch of a $44 billion takeover bid for microblogging website Twitter (TWTR) – Get Twitter Inc. Report by Musk. This offer was the start of a saga marked by twists, public clashes and now a legal battle after Musk withdrew his offer due, he claims, to Twitter’s bad faith regarding the number of fake accounts, or spam bots, present on the platform. A five-day trial is scheduled for October unless the two sides reach a settlement by then.
Investor concern can be seen in the decline of Tesla stock since the offer was first made. Shares have lost 27.4% of their value to $742.50 at the time of writing. On April 13, the date before Musk’s offer, Tesla stock closed at $1,022.37. However, this drop is also part of a context of general decline in the markets, on growing fears of a recession.
For investors and Tesla fans worried that the Twitter saga will distract the tech tycoon, Musk just sent a reassuring message
“Things obviously changed dramatically in the last three years, from near life or death to a company with consistent cash flow and industry leading margins. I’m wondering if you can comment on your personal role in the company and whether you see that changing in terms of your role and time spent at the company over the next three or four years,” an analyst asked the billionaire during Tesla’s second quarter earnings’ call on July 20. “I think you you said a couple of things [like] you wouldn’t be on calls unless there’s something unusual and you’ve been on every call since then.”
Musk responded, first humorously, then seriously.
“I have done a lot of unusual things, let’s face it,” the entrepreneur said. “If there’s only good news, I won’t be on the call. But a tough situation like with shutdowns in China, then then I’ll be on a call, relatively speaking [if] there’s bad news.”
“If all we have is good news then I won’t be on the call,” he smiled.
Then he got serious again.
“I’m committed,” Musk continued. “I’ll work [at]Tesla; I can usefully advance the cause of sustainability and autonomy.”
The company announced stronger-than-expected second-quarter earnings on July 20, although its profit margins narrowed amid surging input costs. Revenues rose 41% from last year to $16.94 billion. Gross automotive margins were 27.9%, a 500 basis point decline from last year.
TheStreet, Inc. All rights reserved. Action Alerts PLUS is a registered trademark of TheStreet, Inc.
Read the full article here