Al Root

Tesla stock was falling in early trading Thursday as investors wondered what the company would be like without CEO Elon Musk at the helm.

Shares of the electric vehicle maker were down 0.7% at $280.35 in premarket trading, while S&P 500 and Dow Jones Industrial Average futures were rising 1.1% and 0.5%, respectively.

On Wednesday evening, The Wall Street Journal reported that Tesla's board had asked Musk to spend more time at the company and had contacted executive search firms to investigate the possibility of a new CEO, citing people familiar with the discussions.

Tesla didn't respond to a request for comment but the company's official account on social-media platform X denied the report.

Calling the report a bombshell is probably an understatement. Musk is the wealthiest person in the world, controls 20% of Tesla stock, including his contested options, and has run the company for almost two decades, transforming it into the world's most valuable car maker by a factor of almost three. As several Wall Street analysts put it, Tesla is Musk and Musk is Tesla.

The second half of that statement is less and less true, though. Musk also runs xAI, which is merging with X and SpaceX, along with several smaller firms. And he has ramped up his political activities, spending millions of dollars on President Donald Trump's election campaign and helping to run the administration's Department of Government Efficiency (DOGE).

The political activities may have been the straw that broke the camel's back. Tesla delivered 337,000 cars in the first quarter, missing estimates by some 40,000 vehicles and down 13% year over year, the company's worst quarterly decline in history. Weak results fueled fears that Musk was turning off core Tesla buyers, politically left-leaning people looking to go green.

Replacing Musk might ease some of the near-term pressure created by DOGE. To be sure, there is no guarantee it would help the stock. It adds uncertainty and, like Wall Street says, Tesla is Musk.

Barron's wrote recently that it's possible to value the car business at roughly $100 a share and the energy storage business at another $100 a share. Anything beyond that can be considered a Musk premium.

It can also be referred to as an AI premium, but Musk is the author of that AI strategy, and Tesla's AI-trained robots and self-driving cars have not yet generated substantial sales or profits.

Tesla stock hit almost $489 in December on euphoria that the incoming Trump administration would benefit the auto maker. Using the $200 mark to value Tesla's main sources of profit, that equates to a Musk premium of some $900 billion. Tesla stock enters Thursday at about $282. That puts the Musk premium at about $$260 billion.

Whatever the right premium is, investors probably don't want it to go away.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 01, 2025 04:11 ET (08:11 GMT)

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