Elon Musk has made headlines by acquiring approximately $1 billion in Tesla Inc. shares, representing a significant vote of confidence in the electric vehicle (EV) manufacturer. This purchase was executed through a revocable trust on September 12, as indicated by a regulatory filing made public on Monday. The timing of Musk’s investment coincided with Tesla Chair Robyn Denholm discussing a proposal to award Musk up to $1 trillion in stock, contingent on the company meeting ambitious performance and market value targets.
Following the announcement, Tesla’s stock price surged by 6.4% during the trading session, reaching its highest level since January 22. As a result, the company’s shares have now increased by approximately 4% for the year, marking a notable recovery from a sharp decline of 45% that was observed earlier in April.
This latest stock purchase is Musk’s first since February 2020. Notably, last year, he sold more than $20 billion worth of Tesla shares to help finance his acquisition of Twitter. Observers view this stock buy as a demonstration of Musk’s belief in Tesla’s future potential after a challenging first half of the year, which saw a 13% decline in global vehicle sales. Despite aspirations for robotaxis and humanoid robots, Musk has warned that the company may face “a few rough quarters” ahead, particularly due to the expiration of certain US electric vehicle purchase incentives at the end of the month.
Dmitry Shlyapnikov, an analyst at Horizon Investments, remarked that this purchase could indicate a strong future for Tesla’s robotics initiatives, but it might also serve as a strategic move to bolster support for Musk’s proposed compensation package. Concerns linger, however, as Tesla’s automotive division faces increasing challenges, with market analysis from Cox Automotive showing the company’s share of the US EV market has dropped below 40% as of August. Additionally, vehicle registrations in major European markets continued their downward trend.
Tesla’s valuation has also come under scrutiny, with its price-to-earnings (P/E) ratio soaring amid declining profit expectations. The company’s shares currently trade at about 186 times forward 12-month earnings, starkly contrasting the S&P 500’s average P/E ratio of 23. Even among top US technology stocks, which include Tesla, the average P/E stands at 30, highlighting a growing disparity between stock price and expected earnings. CFRA analyst Garrett Nelson notes that while there may be some investor optimism, significant near-term challenges cannot be overlooked.
Denholm, who has chaired Tesla’s board since 2018, praised Musk as a “generational leader” when speaking to Bloomberg Television. She emphasized that Musk’s personal political activities should not detract from the company’s performance and reiterated that he has the freedom to express his views in a democratic society. The day after her interview, Musk made a controversial appearance at a London rally organized by far-right activist Tommy Robinson, where he made inflammatory remarks about the potential for violence in the UK. This has ignited criticism, with officials, including a spokesman for UK Prime Minister Keir Starmer, condemning his rhetoric.
Musk, recognized as the world’s richest individual with a net worth of approximately $419 billion, remains a pivotal figure in both the tech and automotive industries, with his decisions and public statements closely monitored by stakeholders and analysts alike.
