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Tesla was once the archetype of an innovative company pioneering the possibilities of electric vehicles. Its market success—both in selling actual EVs and in the stock market—was well known. But last week, Deutsche Bank analyst Emmanuel Rosner asked in a memo if it was about time that investors in the company would “throw in the towel.”
It’s unclear if Tesla CEO Elon Musk has already thrown in the towel when it comes to managing his business. While some of Tesla’s remarkable losses this year—the company has the worst performing stock of 2024, having lost almost 40% of its value since Jan. 1—are due to drops in sales, revenues and vehicle inventory, some of it is directly attributable to Musk’s own decisions. The one that inspired Deutsche Bank’s memo was an apparent “thesis-changing” shift in the company’s strategy. Tesla had been planning to produce a less expensive vehicle, which would have hit dealerships in the last half of 2025. But a news report earlier this month indicated the company’s focus was shifting to robotaxis, which Musk said on X would be unveiled on August 8. Robotaxis, Rosner wrote, have a “likely elongated timeline” to find earnings growth, while the consumer car business has been Tesla’s bread and butter, and the most direct way for the company to rehabilitate its earnings.
Tesla’s stock also took a hit in January, when a Delaware judge voided Musk’s mammoth pay package worth more than $50 billion. Judge Kathaleen McCormick wrote Tesla’s board breached its fiduciary duties by allowing “the largest potential compensation opportunity ever observed in public markets.” Instead of accepting the ruling and working with the board to craft something that could be seen as more objectively fair, Musk immediately vowed Tesla would reincorporate in a state other than Delaware. On June 13, Tesla shareholders will vote to reinstate Musk’s huge pay package—now worth more than $40 billion—and for the company to move its incorporation to Texas. Tesla Board Chairman Robyn Denholm wrote the board supports this compensation package because it presses Musk to “continue to be driven to innovate and drive growth at Tesla because the value of his shares will depend on it.”
“The moment of truth has now arrived for [chief executive] Elon Musk and Tesla,” Wedbush analyst Dan Ives wrote to clients Friday. “Many long-time Tesla believers are giving up,”
But shouldn’t a CEO be driven to foster growth at the company anyway? Success at Tesla and other ventures including SpaceX and Starlink, as well proceeds from the sale of as early internet businesses like PayPal, combined to make Musk one of the world’s richest people. However, given his haphazard management at X, the social network formerly known as Twitter, maybe he does need a direct financial incentive for a growth mindset at his most valuable company. After Musk took Twitter private in 2022, the social network changed dramatically—removing the bulk of content moderation and user verification, both of which built user trust. X doesn’t have to report user numbers, but Edison Research reported last month that the social network has seen a 30% drop in users from 2023 to 2024.
It’s a difficult business climate for companies in all sorts of industries, but there are some very consistent buyers of goods: governments. It can be tough for many businesses to land government contracts, especially if they are small- or medium-sized, but they can do solid business in “micro-purchases” under $10,000. I talked to Glass CEO Paola Santana about it, and an excerpt from our conversation is later in this newsletter.
ECONOMIC INDICATORS
People walk past the New York Stock Exchange earlier this month.
Spencer Platt/Getty Images
There were no new reports or statistics that impacted the direction of the markets last week, but the simmering geopolitical situation in the Middle East took care of that. Tensions in the Middle East ratcheted up considerably, with Iranian missile and drone strikes on Israel last weekend, and Israel retaliating with strikes near an Iranian military base Friday. The S&P 500 hit its lowest level in two months last Monday and continued to fall throughout the week, closing more than 5% down on Friday. Reports of the airstrikes spiked oil prices on Friday morning, immediately causing 2% increases in both Brent Crude and West Texas Intermediate. AAA speculated that continuing conflict could lead to price instability, and the wars both in the Middle East and Ukraine “has the…