Yahoo Finance Can Elon Musk Be Deemed Unfit as CEO? What That Could Mean for Your Tesla Stock
Calling Elon Musk a polarizing figure might be an understatement. The Tesla CEO has built multiple billion-dollar companies and made his investors incredibly wealthy. He’s also threatened to physically fight Mark Zuckerberg, shared controversial theories online and lost $25 billion on his Twitter deal in a single year.
Read More: 3 Types of Investments Predicted To Plummet in Value in Summer 2024
For You: 4 Genius Things All Wealthy People Do With Their Money
It’s all got some people questioning whether Musk could eventually be deemed unfit to lead as Tesla’s CEO. Here’s how the answer could influence your investing decisions.
Wealthy people know the best money secrets. Learn how to copy them.
Can Musk Be Fired From Tesla?
Musk can be fired from Tesla if the company’s shareholders vote to replace him as CEO. However, he currently owns about 20% of the company, which means he gets 20% of its votes.
Assuming that Musk wouldn’t vote to fire himself, the remaining 80% of shareholders would need a strong majority to oust him. Musk has spoken out about a group of activist investors who allegedly want to fire him, but they don’t appear to have the numbers to do so.
In fact, 72% of Tesla shareholders recently voted to approve a $45 billion pay package for Musk. This suggests the vast majority of Tesla’s shareholders are still happy with their outspoken CEO, which makes a Musk firing even less likely in the near future.
Read More: In 5 Years, These 2 Stocks Will Be More Valuable Than Apple
What Could Change?
Musk has been a lightning rod for controversy over the past several years. Although there are no signs that he’ll be fired anytime soon, he could always say or do something unexpected that changes Tesla shareholders’ opinions of him.
If that were to happen, he could be fired. That’s why it’s still a factor worth considering before investing in Tesla stock. Musk’s potential ousting is a risk that shareholders can’t afford to ignore entirely.
What Happens to Tesla’s Stock If Musk Gets Fired?
It’s impossible to say exactly what would happen to Tesla’s share price if Musk were fired. He’s a hugely popular figure and a driving reason behind Tesla’s growth into a $550 billion company.
But Tesla is a business with more than 100,000 employees. Musk, as top dog, may be the most influential of these employees, but the company’s work would continue even if he’s gone. With all that in mind, Tesla’s share price may go through something like the following three-step process if Musk ever gets fired.
1. Downside Volatility
When the news first drops about Musk’s firing, Tesla’s stock price would likely experience an initial downside impulse. This would come from people panic-selling the stock in size, which often happens in periods of uncertainty.
In other words, people trying to avoid further losses on their Tesla shares could sell immediately. A sudden influx of sellers would drive the share price lower until everyone who wants to sell has done so.
2. Repricing
Once the market responds to Musk’s exit, Tesla’s stock would then go through a period of consolidation and repricing. This is when market participants establish a new baseline value for the company now that it no longer has Musk.
There are a few different directions Tesla stock could take from here. It will depend on how much market participants think Tesla will miss Musk’s contributions. If they believe Musk is only a figurehead for Tesla today, the company’s share price could recover to its pre-firing level.
However, if market participants think Musk held an irreplaceable role at Tesla, they might decide the company will never be the same without him. This could lead to a prolonged sell-off that leaves Tesla with a much lower share price in the end.
This repricing phase could last weeks or months. It would depend on Tesla’s new leadership strategy, Musk’s statements and other factors that are difficult to predict in a hypothetical scenario.
3. Back to Business as Normal
Once Tesla’s shares are repriced, the stock would eventually land at a new equilibrium price range. From there, it should behave like any other stock — responding positively to good news and negatively to bad news.
Musk leaving Tesla could make it a less valuable company, given his wide sphere of social influence. But it’s tough to say how much less the company could be worth without him. That’s why we have markets, which decide questions like these through the ongoing buying and selling of shares.
Elon’s Probably Not Going Anywhere
It’s smart to think through the downside risks when making investing decisions. But you also have to assess the likelihood of those risks actually taking place.
In this case, there are no signs that Musk will be leaving Tesla anytime soon. Shareholders recently reconfirmed their faith in his leadership, and something drastic would likely need to happen for that to change.
More From GOBankingRates
In Less Than a Decade, You Won't Be Able To Afford Homes in These 20 Arizona ZIP Codes
These 10 Used Cars Will Last Longer Than an Average New Vehicle
This article originally appeared on GOBankingRates.com: Can Elon Musk Be Deemed Unfit as CEO? What That Could Mean for Your Tesla Stock
