970×90

Elon Musk’s Fans Just Took a Big Hit as Tesla Shares Tank

Elon Musk’s Fans Just Took a Big Hit as Tesla Shares Tank


The regulators may have moved ahead after Mr. Musk backed out because they concluded that they had strong evidence in this particular case. As a result, the action may not signify too much about the overall stance of the commission under Mr. Trump.

Still, pursuing this case against a chief executive with a big fan base and a reputation for groundbreaking entrepreneurship carries significant risks for the agency. A victory for Mr. Musk would be a major defeat for the commission.

Tesla’s shareholders have to assess what will happen to the company if Mr. Musk is not the chief executive. Sometimes the departure of the boss at a troubled company means the emergence of other problems as the new guard tries to clean house. Changes in corporate leadership in the past have often been followed by bruising financial hits and disruptive moves to overhaul the company that don’t always pay off.

Tesla shareholders may hope that the company ends up like Uber, whose co-founder Travis Kalanick left last summer. Like Mr. Musk, Mr. Kalanick defined his company but was also accused of bringing it turmoil. But Uber was under less financial pressure than Tesla. And as a private company, Uber can try to heal itself outside the glare that comes from being on the public markets.

Tesla, worth roughly $50 billion on the stock market, is hemorrhaging cash. General Motors, with more or less the same market value, brought in $17 billion of cash last year. True, the stock market’s bears, short-sellers, have placed big bets on a collapse of Tesla’s stock. But they have not had much success. Mr. Musk has convinced many investors that Tesla has an amazing future.

After shares dropped on Friday to $265, Tesla’s shares are still changing hands at nearly 100 times the earnings Wall Street analysts expect the company to make next year, a valuation that exceeds that of many successful, fast-growing technology companies.

Mr. Musk’s legal problems may now complicate Tesla’s efforts to alleviate a potential cash crunch. The company may need to find over $1 billion to repay convertible debts that come due in the next few months. Analysts have expected Tesla to raise fresh money by selling new shares. But the legal cloud over the company could make it harder to quickly raise capital in the market.

The commission’s suit may go down as a famous reminder to investors that wildly bullish statements from chief executives should be treated with skepticism. But Tesla’s run reveals that investors’ willingness to believe in a good story can still grip the American stock markets.



Source link

About The Author

Momizat Team specialize in designing WordPress themes ... Momizat Team specialize in designing WordPress themes

Related posts

Leave a Reply