Elon Musk faced a challenging week as institutional shareholders in Tesla urged the company’s board to rein him in, while SpaceX’s Starship rocket exploded during its first test flight. Tesla’s Q1 earnings report saw net income decrease by over 20% from the previous year, causing Tesla shares to drop by almost 10% and erasing almost $13 billion from Musk’s net worth. Additionally, Musk’s Twitter account removed verified status from nonpaying subscribers and government officials and eliminated markings for government officials, raising concerns of impostors running rampant on the platform.
Elon Musk, the CEO of SpaceX and Tesla, has had a tough week. It began with Tesla releasing its first-quarter earnings report on Wednesday, which showed that net income had decreased by more than 20% from the prior year, leading to a nearly 10% decline in Tesla shares on Thursday. This, in turn, erased almost $13 billion from Musk’s net worth, according to the Bloomberg Billionaires’ Index. The week continued with the midair explosion of the SpaceX Starship rocket during its first test flight on Thursday. Finally, institutional shareholders in Tesla wrote an open letter to the company’s board of directors, calling for them to rein in an “over-committed” Musk.
The letter, which represents more than $1.5 billion in holdings, called for the board to bring in more independent members and to work harder to solve issues at the company that poses “substantial legal, operational, and reputational risks” to the electric vehicle maker, “jeopardizing its long-term value.” The investors are particularly concerned with Musk and Tesla’s handling of human rights and workers’ rights. They cited many lawsuits in which Tesla has been sued over racial discrimination, union-busting, wage theft, sexual harassment, and unsafe working conditions.
The investors claim that Tesla appears to be embracing a culture of being “above the law” and that the company now faces criminal probes by the U.S. Department of Justice, the National Highway Traffic Safety Administration, and California’s Department of Motor Vehicles over its Autopilot technology and claims about self-driving. The letter also criticized Musk’s behavior, saying that instead of working to address problems with regulators, he has made derogatory tweets and comments, fueling tensions.
The open letter to Tesla’s board comes after Tesla shares have declined more than 15% over the past month. Nia Impact Capital’s Kristin Hull told CNBC that the letter is meant as a “call to action,” and she is hoping that Tesla Chair Robyn Denholm will take the time to write a meaningful reply, at a minimum. “We want to see the board take their job seriously; we don’t see them doing a good job at being Elon Musk’s boss.”
The week also saw eroding margins for Tesla, as its first-quarter earnings update revealed ballooning inventory levels and eroding profit margins. According to the company’s investor presentation for the first three months of 2023, Tesla owes vendors $7.32 billion and holds $14.38 billion in inventory after ramping up production in its factories and implementing price cuts through the first quarter.
While Tesla raised prices on Model S and X vehicles in some markets on Friday, those models represent a minor slice of overall sales and production for Tesla today. The modest price hikes were also accompanied by an incentive: three years of free supercharging on the company’s electric vehicle charging network.
Tesla’s stock price slide has had a direct effect on Musk, whose personal wealth is mostly derived from his Tesla holdings, as he lost approximately $13 billion of his on-paper net worth the day after Tesla’s first-quarter earnings. The airborne explosion of SpaceX’s Starship rocket on Thursday during its first test flight marked the culmination of the previous week’s activities.
Finally, Musk’s Twitter activity has caused controversy once again. The social media platform, which he bought last year for $44 billion, removed verified status from public figures and government accounts, including President Joe Biden, the pope, and even transit agencies, including San Francisco’s BART. Additionally, Twitter removed “government-funded” and “China state-affiliated” labels from the Twitter accounts of many global media organizations, implying government involvement in editorial decisions by those outlets.