How Elon Musk Lost $1 Billion In Two Minutes

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Posted: Apr 09, 2019 12:03 PM
How Elon Musk Lost $1 Billion In Two Minutes

Source: AP Photo/Chris Carlson

Tesla is never disappointing in their ability to disappoint. We explained earlier this year how easy it is for Tesla’s stock to stumble or even plummet based on a single bad story, and how that – among other things – made them a risky investment. That viewpoint has been corroborated again, with Tesla's CEO losing over a billion dollars in 2 minutes after Tesla stock dropped by 8%.

The catalyst for this was a dramatic failure by the company to meet production targets. This chart from SeekingAlpha shows just how bad the trend is.

To make matters worse, the SEC asked a judge to hold Elon Musk in contempt of court. The judge gave Musk and the SEC two weeks to work out their differences, and will decide whether or not to hold Musk in contempt if that process fails.

Elon Musk’s constant public controversies, and his company’s repeated failure to live up to expectations, are bad news for anyone invested in Tesla stock. The indices I work on, FLAGLSX and VCUSX, have held Tesla at 0% for years, because we saw the underlying problems that made Tesla such a risky investment.

“Our model flagged Tesla in several areas related to corporate governance. They were, unsurprisingly, flagged for executive misconduct, having the CEO and the chairman be the same person (this was later forcefully resolved by the SEC), as well as several categories related to shareholder rights and governance. We didn’t just look at the way Elon Musk acts and decide to not invest in Tesla, our model specifically identified the way in which Tesla’s corporate structure violated our principles by making Elon Musk unaccountable to shareholders.”

Despite Musk losing $1 billion in a single day, and Tesla stock dropping precipitously after every bit of bad news for the company, they show no signs of changing their corporate structure. The trend that has defined Tesla for over a year doesn't appear to be changing anytime soon: Elon Musk says or does something unbecoming of a CEO, or Tesla fails to meet production deadlines, and the stock plummets.