While Tesla (NASDAQ:TSLA) bulls were celebrating its coming inclusion in the S&P 500 and dazzling year-to-date returns of Tesla stock, the company’s founder and CEO Elon Musk announced he has coronavirus.
The S&P news was what everyone focused on, the shares zooming up over 12% overnight. As trading opened on Nov. 17 Tesla was worth $387 billion. That’s more than Volkswagen (OTCMKTS:VLKAY), Toyota (NYSE:TM) and what were once called Detroit’s “Big Three” put together.
Musk is 49. He is in generally good health. His weight is listed at 180, but recent pictures show him to be huskier. Musk has expressed skepticism about his diagnosis, but the virus doesn’t care.
What happens to Tesla stock with Elon Musk out of the picture?
Musk Is as Vital as Steve Jobs
Musk is as vital to Tesla as Steve Jobs was to Apple (NASDAQ:AAPL) in the late 2000s. Jobs was diagnosed with pancreatic cancer in 2004. But as late as 2009, when he underwent a liver transplant, the company wasn’t being candid about it. From China, where I was vacationing at the time, I was livid.
Jobs’ fanbois still haven’t forgiven me.
But I had a serious point, one that bears repeating. Publicly traded companies have a fiduciary duty to be transparent concerning the health of top executives. When you have a key man like Musk, or Jobs, the right to privacy is trumped by shareholders’ interests. Otherwise, insiders can short the stock ahead of the news and make a killing.
Musk was dubbed “Space Karen” for his reaction to his recent tests. The BBC reports he has a moderate case of Covid-19. Given his wealth and fame he should get the best treatment, as President Donald Trump did when he had it in October.
Musk’s risk of death, in other words, is lower than it would be for you or me. But Broadway star Nick Cordero died of Covid-19. He was 41. Billionaire Stanley Chera, a friend of Trump’s, died of from the coronavirus. There is no clear line of succession at Tesla, as there was for Tim Cook when Jobs got sick. Tesla is even more dependent on its founder than Apple was on Jobs.
Back at the Ranch
Meanwhile, Tesla goes from strength to strength.
The reason is Tesla’s hold on the battery market. Volkswagen talks about competing with it and Ford (NYSE:F) is finally talking about making its own batteries.
But Tesla’s “Battery Day” announcement of a new “tabless” design that could cut the cost of a Tesla car to $25,000 has blown the industry away. No one doubts Tesla’s ability to scale production anymore, as I did in 2018. The company appears to be a decade ahead in what’s now seen as the key component, not just to electric cars but the energy market.
Investors are ignoring China’s recall of 50,000 Teslas with bad suspensions. They’re ignoring the fact that China hates other companies controlling its market, especially American firms like Tesla. They’re ignoring Germans’ resentment of its Berlin Gigafactory, and the firing of its designer.
The Bottom Line for Tesla Stock
Tesla has made a lot of people rich beyond Musk. The company’s value has more than quadrupled this year as its control over new car markets, and the energy market, has become clear.
But Tesla is still Musk. There is no backup plan, as there was at Apple. I wish ill on no one, but as an investor I always have a backup plan.
If you have made a killing on Tesla, I wasn’t as smart as you are. But it still makes sense to be diversified. Don’t be dependent on any one investment. Don’t fall in love with your stocks.
Take some profits.
At the time of publication, Dana Blankenhorn had long positions in AAPL.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn.
