Tesla stock has been on a tumultuous rise and fall. It has just closed out its worst month, quarter, and year on record. It has surpassed Meta as the weakest performing stock in 2022 among the most valuable tech companies. The situation has gotten so dismal that CEO Elon Musk has reappeared at Tesla after seemingly vanishing into the deep and winding halls of Twitter. As part of an end-of-the-year Thank You email to Tesla employees, Musk tried to assuage employee concerns. “Don’t be too bothered by stock market craziness,” he soothed. “As we demonstrate continued excellent performance, the market will recognize that.”
Always mercurial, often brilliant, and frequently immersed in minutia, Musk the human has also gone through a bit of madness this year. Has he finally seen the light of his actions and their direct correlation to the Tesla “market craziness?” Has 2022 been an aberration for the all-electric car company, like so many legacy automakers, due to geopolitical supply chain issues and inflationary pressures? Or is “the real difference” to Musk that his legacy is on the line, that he as a visionary may be contributing to a shortfall where Tesla’s promise to be constantly innovating and ahead of the automotive pack may be evaporating?
Here’s the text of the email Musk sent to Tesla employees on Wednesday.
From: Elon Musk
To: Everybody
Subj. Final Few Days
Date: Dec. 28, 2022 [Time Stamp removed]
Just a quick note to thank you for your hard work and congratulate you on exceptional execution in 2022!
Since we have a lot of cars arriving at the last minute, it is important to rally hard and do everything we can to get our cars to customers who have ordered them before midnight on Dec. 31. Also, every incremental car we produce that can be delivered in time also matters.
Please go all out for the next few days and volunteer to help deliver if at all possible. It will make a real difference!
Thanks,
Elon
Btw, don’t be too bothered by stock market craziness. As we demonstrate continued excellent performance, the market will recognize that. Long-term, I believe very much that Tesla will be the most valuable company on Earth!
Musk sends out an end-of-year memo to employees every year. As he has done in the past, he asked employees to step up to the cause of maximum deliveries by volunteering to assist in getting new cars into the hands of customers. In other parts of the year, that work is done by salespeople and delivery teams.
Employee Emphasis on Tesla Stock Valuation
In its 2021 SEC annual filing, Tesla explained that “we consider our relationship with our employees to be good. Our key human capital objectives in managing our business include attracting, developing and retaining top talent while integrating diversity, equity and inclusion principles and practices into our core values.”
Relationships involve a give-and-take, a series of opportunities where each side benefits, or where loss is felt in relative proportion by both sides. The “Btw” addendum Musk included in his 2022 end-of-year email to employees references the thrashing that Tesla stock has taken this year. Many Tesla employees, including factory workers, are paid with stock-based compensation. “The majority of our employees have the opportunity to receive additional Tesla equity each year based on their performance,” the 2021 filing affirmed.
The unexpected and rather sudden low Tesla value — the “market craziness” to which Musk referred in his company-wide email — may have become a disincentive to employees, as indicated by recent employee behind-the-scenes grumbling.
Usually, a stock’s share price is determined by supply and demand in the market. If there is a high demand for its shares, the price will increase. If the company’s future growth potential looks dubious, sellers of the stock can drive down its price. Tesla stock does not necessarily follow this pattern of valuation, perhaps influenced more by other factors, like what is going on with Elon Musk.
Much of Musk’s pay isn’t in cash, although that’s not what’s different from other CEOs. Musk has been compensated vigorously with company stock. The plan to pay Musk initially totaled in the tens of billions of shares in the company, with the stipulation that he met performance goals. Tesla has been asked to explain its executive compensation, even though Tesla’s board of directors has defended the compensation package. Even in the atmosphere of CEO “greedflation,” Musk’s extravagant compensation plan stands distinctly apart from that of other CEOs.
That means as the value of Tesla stock rose and rose, so, too, did Musk’s brand association with Tesla as a product. As Tesla’s stock shot skyward, it created a net worth of over $300 billion at one point.
Let it be said that other shareholders also reaped the gains, perhaps even thinking its rise would continue indefinitely — that is, until its 2022 plunge.
A complaint about Musk made in 2018 by Ed Kim, vice president of industry analysis at AutoPacific, sums up the dilemma: “Elon is Tesla, Tesla is Elon.” Musk is the ingenious leader of Tesla, and Tesla very much depends on his outstanding talents and active participation in the design, production, and marketing of Tesla vehicles.
The Rollercoaster Ride of 2022 Tesla Stock Valuation
The company’s shares have rebounded a bit this week, following an 11% slump on Tuesday. Tesla shares plummeted 42% in December and nearly 70% this year. The precipitous drop resulted from concerns over less demand for EVs, compounded by Musk’s activity in various parts of the day-to-day operations of running Twitter. Moreover, Musk sold tens of billions of dollars worth of his Tesla shares this year, in part to finance that $44 billion purchase of Twitter.
Musk has blamed Tesla’s declining share price on rising interest rates and activities by the Federal Reserve. Not everyone agrees with Musk’s assessment, of course. Many investors, Wall Street analysts, and employees see Musk’s focus on Twitter and extensive personal Tesla stock sales as top reasons for the stock’s recent performance.
Final Thoughts about Tesla’s “Market Craziness” Going into 2023
Analysts expect Tesla to deliver 442,452 vehicles in the fourth quarter, according to Refinitiv data. Tesla has been aiming for 50% year-over-year growth in vehicle deliveries but has cautioned investors it may not meet that target every year.
As globalization’s fragility is exposed, the result in the automotive world is likely more instability in costs, less cushion in profitability, and additional disruptions of Tesla’s production capabilities in the foreseeable future. Musk’s distractability is compounded by escalating global economic dilemmas, with signs that the demand in China for new EVs is decelerating, which indicates that the company could see lower growth than had been anticipated.
Then again, despite the criticism leveled on Musk and his absence from Tesla, several Wall Street investors are seeing the low Tesla stock price right now as an opportunity. Cathie Wood and her investing firm Ark Invest recently purchased more Tesla shares. Baird Equity Research’s Ben Kallo has proclaimed Tesla as a “Best Idea” stock for investors in 2023. Morgan Stanley analyst Adam Jonas continues to stick with Tesla, citing Tesla’s valuation, cash flow, innovation, and cost controls for maintaining his rating. “Tesla may be in position to extend its lead vs. the EV competition,” Jonas said.
We can’t wait to see what 2023 brings for Tesla.
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