Divest Tesla

The Most Important Leverage Point to Hamstring Musk

It’s clear that Elon Musk has become a grave threat to democracy.

Not only is he dismantling the rule of law in the United States with illegal seizures of governmental powers, invasion of sensitive software databases, and mass firings that breach the separation of powers in the Constitution, he is actively undermining democracy globally by amplifying misinformation and pouring vast sums into far-right parties and campaigns.

His sheer speed and audacity are a deadly combination with Trump’s disdain for the law, leaving American democracy hanging by a thread. And Musk’s ambitions clearly do not end at the borders of America.

As a once-proud Tesla owner, I have come to the reluctant realization that stopping Musk is essential for the world and to do so means mass removal of support for Tesla, which is his financial Achilles heel as it is the only publicly traded company he owns. His stake is currently worth around $160 billion but even more importantly, he has leveraged that stake for massive loans for other endeavors as well. If his Tesla wealth were to drop to $8 billion, for example, his whole portfolio could become a wobbly house of cards, especially if his non-public companies become toxic by association as well. His approval rating has cratered just in the last few months, going from +19 to -11 and it only promises to get worse.

It’s worth noting that Tesla’s reputation has also been in freefall, with European sales of Teslas dropping at staggering rates: 75% lower in Spain this January over last, 60% lower in Germany, etc.. California Tesla sales, which drove massive Tesla adoption, dropped 12% last year before the DOGE actions in the government. Protests are arising in front of Tesla dealerships around the world and the brand has rapidly become increasingly toxic as a result of its close association with Musk. Even people who run Tesla fan forums are selling off their Teslas.

Global activists have taken up the mantle and catalyzed a growing protest movement, but most protests are focusing on the cars or dealerships because they are the most visible public expression of Musk’s wealth and power. This is a slower path to have an impact as pretty much all the existing cars will stay on the road somewhere.

The real vulnerabillity for Musk is Tesla’s stock price, which soared in recent years to almost unprecedented levels in relationship to underlying business fundamentals. Currently, Tesla has a market capitalization of just under $1.1T and its stock trades at a P/E ratio of an eye-popping 172 on revenues of $97B. For comparison, Toyota, the biggest manufacturer of cars in the world with $300 billion in revenue, has a market cap of $238 billion and a P/E ratio of only 9. Put differently, based on pure fundamentals as a car company, Tesla is 20x overvalued vs. Toyota. Since 85% of its current revenue comes from car sales (which should make it resemble Toyota), the stock price is almost entirely a bet on its future business lines focused on robots and automated taxis.

Tesla’s stock valuation is thus entirely dependent on sustaining the belief amongst investors that it will successfully dominate new and important markets. That makes it psychological fragile and vulnerable to swings in collective psychology and investor confidence. What if Tesla car demand continues to crater this year (dropping 50% globally) AND it becomes clear that it’s not going to have enough free cash or positive reputation to become a leader in the projected new markets? As I write this, Tesla’s stock price has dropped 4% in just the last two hours.

What if a growing base of global consumers decides, collectively, that we don’t want to make Musk richer and more powerful and make the ethical decision to divest from anything he owns?

Could the growing toxicity of Tesla’s brand already underway lead it to implode, tanking its ability to enter these new markets? Could the stock drop 90-95% and trade closer to Toyota in terms of multiples on earnings (if it indeed retains any)?

The answer, I believe, is yes. Imagine that a sustained global #DivestTesla movement puts heavy shareholder pressure on the 38% of the shares owned by institutional investors as well as individual investors. How might that affect an irrationally inflated stock price? What happens if the bubble bursts on one of the world’s most potentially overvalued stocks and investors lose hundreds of billions?

It could create the equivalent of an investor run on the bank: rapid selling of positions and a downward spiral in price, with massive shareholder anger at Musk’s band of loyalists on the Board that have protected him as CEO. There would be a rapid increase in investor calls to eject Musk as CEO, and since he owns just 13% of the company, his role would be at risk as investor activism grow.

If a global #DivestTesla movement indeed gathers steam, investors would start to head for the exits much faster than Tesla owners can sell their cars which could then further impact demand for new cars.

Before Tesla ramps up appreciable revenues for its robots or self-driving taxi fleet, which will certainly not happen this year, it is in a critical, vulnerable window where it needs the cash and the prestige from an inflated stock price to pivot into new markets. The truth is that its car lineup is aging and being rapidly outcompeted globally by companies like BYD. The other major car companies are all now entering the electric car market with quality products.

In the 1980s and 90s, one of the most effective divestment campaigns ever enacted was against the South African government over apartheid. Over 200 U.S. companies cut ties with South Africa from 1985 to 1990. These campaigns, often driven by activists on college campuses, deserve significant credit for bringing down the regime that oppressed so many. Now, in the 2020’s it appears to be time to implement the same, coordinated financial pressure on South Africa’s most famous son, a man who now imperils millions globally with increasingly anti-democratic actions.

The good news is that such a divestment movement is entirely ethical, since each of us can legitimately say that we do not want to support a business that is engaged in activities that run counter to our values. Tesla is, for many of us, clearly no longer aligned with our values. Withdrawing our support from his most significant business is a way of affirming our values and redirecting our money to companies that are building the world we want to live in. It’s a healthy, positive step to divest from what we no longer believe in and encourage others to do the same.

A rapid decline in Tesla’s value, which is currently the 8th largest company by market capitalization, would send a profoundly important message to other major tech titans who have decided that bending the knee to Donald Trump is necessary for their business interests. If the richest man in the world can be brought low, financially speaking, and a treasured brand badly damaged, they will have a stronger incentive to not align closely with the Trump’s administration or its goals. Right now, they see and feel the pressure from Trump to pay homage (or face the pain he can inflict) but they haven’t yet felt much consumer and investor pressure from the other side. If Tesla’s stock is shrunk by 10x, they will think, “Who could be next?” which can push them towards democracy-affirming behaviors.

A rapid decline in Tesla’s share price would also give the global grassroots resistance to Trump’s agenda a massive infusion of confidence, showing that collective action is more powerful than the richest oligarch in the world in the world. That confidence will be necessary to safeguard other aspects of democracy during Trump’s reign.

Finally, this would help to amplify the chasm in the coalition between MAGA and the tech elite, a goal of populist provocateur Steve Bannon, who hates Musk and sees him as a threat to their movement. A weakening and increasingly unpopular Musk might well be ejected from Trump’s orbit if he threatens Trump’s approval and core base of appeal. This splintering of Trump’s coalition is key to mitigating the damage it can cause to our democracy.

While Musk is not going to run out of money completely, a run on Tesla stock would pull his attention and focus away from the DOGE attacks on American government. It would also make it harder for him to cut sweetheart deals between his other companies and the federal government. Would xAI get massive government contracts in this scenario? Would he get more SpaceX deals? Reducing his financial firepower would enable more people - including Republican congressional leaders - to stand against further self-dealing. Musk is already probably the #1 recipient of US government contracts, with $21 billion in government contracts to date and he’s been systematically dismantling agencies that threaten his power and his wealth through investigations.

If he’s forced to scramble to rescue Tesla from a death spiral and pushed to liquidate other assets to cover debt payments and generate cash, he’s going to be spending less time dismantling our democracy or pouring money into right-wing candidates. Right now, he has only financial upside from destroying the agencies that have been investigating malfeasance at his various companies.

In short, a greatly diminished Tesla can diminish Musk’s democracy-destroying powers fairly quickly. I believe it’s one of the highest leverage actions we can collectively take.

So how can you help to make it happen?

First, divest from Tesla stock yourself. Second, put direct, sustained pressure on any 401(k) funds or institutional funds that you are a part of to divest as well. Third, use the hashtag #DivestTesla on social media. And fourth, spread the word by sharing this article, particularly with grassroots groups that can organize increasingly effective pressure campaigns focused on bigger funds that hold the stock. The more visible a #DivestTesla campaign is, the more effective. If grassroots pressure mounts quickly, we could see a downward spiral in stock price rapidly.

Musk has done more to undermine American democracy in one month than perhaps any man in our history. We need to preserve what we can of American democracy before it is too late. A successful campaign will be a great affirmation of the power of millions working together to overcome an anti-democratic billionaire. And that is perhaps the most important lesson for all of us to remember now. Ultimately, we all hold the power if we choose to work together.