Trump could destroy Tesla and Musk
Without a big attitude adjustment, this could get serious.
Hello! Tesla investors get that the feud between Musk and Trump is a big deal. But it is potentially much more serious than money or politics. Unless Musk bends the knee, the feud could lead to him being investigated and/or removed from Tesla.
Tesla’s stock trades less on fundamentals than as “a call option on Elon Musk.”
As a result, yesterday afternoon, when Musk went to verbal war with President Trump, Tesla investors freaked out.
In a few hours, Tesla tanked 14%
It then recovered modestly, as social-media hostilities paused and Musk appeared to back down a bit.
Yes, there is a lot of money and politics at stake. But depending on what happens next, the Trump-Musk war could also escalate — or de-escalate — dramatically, with equally dramatic implications for Tesla’s stock.
For example, Trump could have Musk investigated, which would likely lead to Musk being replaced as Tesla’s CEO.
That outcome — or even part of it — would be disastrous for Tesla’s stock.
Tesla’s value depends almost entirely on Elon Musk
As we’ve discussed, in the view of Wall Street’s top Tesla analyst, Tesla’s shrinking car business accounts for less than a third of the value of the stock.
The rest is based on hopes and dreams about businesses that Tesla hasn’t launched yet, including robotaxis, “network services” (subscription-based feature updates), and humanoid robots.
Also, to a greater extent than any other ~trillion-dollar company, Tesla’s value is based on the attention, health, enthusiasm, and availability of Elon Musk.
How much of Tesla’s value does the market attribute to Musk?
Thanks to recent events, we actually have a good estimate of that.
With Musk healthy and in the good graces of Pres Trump, the market assigns about $100 per share, or ~$300 billion, of Tesla’s value to him.
A month ago, when Elon was consumed with Trump Administration work (DOGE) and paying little attention to Tesla, Tesla’s stock was trading in the $225-$250 range.
Then, in late April, when Musk announced that he was leaving DOGE and refocusing on Tesla and his other businesses, Tesla’s stock began to surge. Within 5 weeks, it reached a high of ~$350, up more than $100.
So, in the eyes of Tesla investors, a healthy, focused, and Trump-approved Musk was worth at least $300 billion.
But now Musk is in a flame war with Trump.
Although Musk is still the richest man in the world, Trump is the most powerful man in the world. And Trump has weapons that Musk’s money can’t buy.
Namely, control of the U.S. government and justice system.
Trump has already threatened to cancel the contracts that the U.S. government has with SpaceX and other Musk companies.
And Trump ally Steve Bannon has already suggested that Trump seize SpaceX and launch investigations into Musk’s reported drug use and citizenship.
Could Trump do that?
He could certainly ask the Justice Department to pursue it.
Would Trump do that?
If he’s mad enough, why not?
Remember Mikhail Khodorkovsky?
Back in 2003, a Russian oligarch named Mikhail Khodorkovsky — then the richest man in Russia — publicly took on Vladimir Putin. Initially, it seemed like the two men might be somewhat equally matched. But Khodorkovsky was soon charged with crimes, convicted, and sent to a gulag.
Could Trump send Musk to a gulag?
Not directly. But he could make Musk’s life miserable. And he could make it so Musk might eventually be forced out of Tesla and other companies and/or end up in prison.
Specifically, Trump could pressure the Justice Department and FBI to investigate Musk— for example, for reported drug use.
A week ago, a New York Times story reported that Musk has extensively used drugs like ketamine, psychedelics, and ecstasy, sometimes in the company of others. An investigation into this could drag Musk and friends and associates into a lengthy and painful legal quagmire. And some Musk friends and associates might not be willing to go to the mat for him — especially if they’re threatened with prosecutions and jail time themselves.
At least for now, if the U.S. government were to charge Musk with crimes, an impartial judge and/or jury would have to convict him. But regardless of whether Musk is guilty of anything, having its CEO under criminal investigation would be hard for a public company like Tesla to ignore.
Tesla’s Board has tolerated behavior by Musk that other boards never would. But there’s a limit to that. And if Elon Musk were to become the subject of a criminal investigation, I believe the Board would have to act.
Specifically, I think the Board would likely have to place Musk on leave and hire another CEO.
Without Musk, Tesla is screwed
In my view, Elon Musk is actually worth way more than $300 billion to Tesla.
When Tesla’s stock was trading in the $225-$250 range, Musk was in the good graces of the Trump Administration and able to influence Trump policy. And Tesla’s stock was benefitting from that.
But if Musk becomes an avowed Trump enemy, any benefits Tesla might have gotten from its alliance with the Trump Administration will vaporize. And if Trump’s retribution forces Tesla to remove Musk, then Tesla will no longer even have Musk as CEO.
Without Musk, the glorious future businesses that Tesla investors are staking the value of the stock on will, in my view, also vaporize. Any new Tesla CEO will focus on trying to save Tesla’s car business. And he or she will almost certainly lack Musk’s ability to get investors to pay up for future businesses that don’t exist yet.
So, instead of being a “call option on Elon Musk” — and on all the amazing things Musk might do in the years ahead — Tesla’s stock will become the stock of a struggling car company.
Could Musk and Trump just apologize and make up?
Yes, they could. Or, at least, Musk could.
Musk is smart, so, despite yesterday’s bravado, he’ll probably realize that a war with Trump could mean the end of him and his companies.
Yes, Musk’s influence might be able to derail Trump’s “Big Beautiful Bill” and create other headaches for him and the Administration. But what Musk can do to Trump pales before what Trump can do to him.
So the smart move would likely be for Musk to apologize and bend the knee. Fortunately for Tesla investors, last night’s partial climb-down made it seem like he realizes that.
(Credit to tech-and-market observer Albert Wenger for predicting this possible future back in March when Trump and Musk were the best of buds).
Thank you for reading Regenerator! Disclosure and reminder: I own Tesla through index funds. This is not investment advice.