Musk Has Destroyed His Image: Gerber Kawasaki CEO

Key Concepts

Tesla, Elon Musk, Board of Directors, Political Statements, Brand Image, EV Market, Competition, Subsidies, Valuation, Shareholder Value, Marketing, Consumer Perception, Financial Risk, Robo-taxis, Tesla Stock.

Impact of Elon Musk's Political Involvement

The speaker, Ross Gerber, expresses deep concern regarding the negative impact of Elon Musk's political statements and actions on Tesla's brand and financial performance. He believes Musk's political engagements are "horrific for the company." Gerber argues that Musk's actions are alienating potential customers, particularly in markets like Europe, where anti-billionaire sentiment is strong. He cites Italy as an example, where historical experiences with fascism and figures like Berlusconi create a negative perception of Musk.

Example: Gerber mentions being in Italy and observing a strong negative sentiment towards Musk, which he believes will hurt Tesla's sales.

Tesla's Market Position and Competition

Gerber challenges the notion that Tesla can thrive without subsidies. He argues that the $7,500 tax credit is significant for potential buyers of a $40,000 car. He also points out that Tesla's competition extends beyond EVs to include hybrid vehicles, which offer a balance of efficiency and affordability. He notes that EV sales are soaring in Europe, but Tesla is not the primary beneficiary, indicating increased competition.

Data: Gerber mentions that EV sales are soaring in Europe, but not necessarily for Tesla.

Elon Musk's Re-involvement in Sales

The speaker questions the wisdom of Elon Musk's re-involvement in Tesla's sales efforts in Europe and the US. While acknowledging Musk's engineering talent, Gerber believes his damaged public image makes him a liability from a marketing perspective. He suggests that Musk's refusal to apologize or acknowledge his missteps further exacerbates the problem.

Argument: Gerber argues that Musk's involvement in marketing is detrimental due to his damaged image.

The Board of Directors and Corporate Governance

Gerber is highly critical of Tesla's Board of Directors, stating that they are not independent and are unlikely to take action to curb Musk's behavior. He claims the board members are beholden to Musk, rendering them ineffective in protecting shareholder interests. He mentions that Delaware courts have repeatedly questioned the board's independence.

Statement: "They're not going to do anything. And we all know that they are all paid by Elon and worked for Elon. And it's not an independent board."

Financial Concerns and Valuation

Gerber expresses concern about Tesla's high valuation (150 times earnings) compared to other tech giants like Microsoft, Nvidia, Google, and Meta, which trade at lower multiples (under 40 or 30). He questions the justification for this premium, citing the unproven potential of robo-taxis. He warns investors that a "reckoning" will eventually come, and the stock could easily drop in half if the current situation persists.

Data: Tesla's valuation is 150 times earnings, while other tech giants trade under 40 or 30.

Gerber Kawasaki's Position and Advocacy

Gerber clarifies Gerber Kawasaki's position on Tesla stock. While they have reduced their holdings, they still manage over $60 million in Tesla stock for clients. Gerber emphasizes that he is advocating on behalf of these shareholders, who are long-term Tesla believers but are concerned about Musk's actions. He also mentions that he personally sold a lot of his personal position, but still owns some shares with a cost basis of $2.50.

Data: Gerber Kawasaki manages over $60 million in Tesla stock for clients.

Subsidies and Economic Impact

Gerber refutes Musk's claim that Tesla doesn't need subsidies. He argues that removing subsidies will make Tesla cars more expensive, leading to lower sales, which contradicts basic economic principles.

Argument: Making the car more expensive means less people will buy it.

Conclusion

Ross Gerber's primary concern is that Elon Musk's political actions and controversial public persona are significantly harming Tesla's brand, sales, and ultimately, shareholder value. He believes the board is failing to address the issue, and the company's high valuation is unsustainable given the risks. He advocates for Tesla shareholders, urging the company to prioritize its business and brand over political battles. He sees a potential for significant stock decline if the current trajectory continues.