Elon Musk, the CEO of SpaceX and Tesla, has been in the headlines lately. His political ambitions and history of dealings with financial analysts have warranted substantial attention. In a sequence of events that unfolded over the past week, Musk’s actions have raised questions about his leadership at Tesla amidst a growing rift with the company’s board and analysts.
Musk worked hand-in-hand with the Trump administration during the first half of this year. Together, they trained their sights on the largest single effort to downsize the federal government in modern history. He recently concluded his formal engagement with the administration at the end of May. Not long after that, he found himself in a very public kerfuffle with Trump over a conservative vs. liberal spending bill and … Following this, Musk announced the formation of a new political party, dubbed the America Party, aimed at opposing Republican candidates who supported the spending bill backed by Trump.
Musk promised that this new America Party would “return freedom to Americans.” This announcement signals his move away from corporate responsibilities to full time involvement in the political world. Yet, analysts have responded harshly to this pivot. Dan Ives, an analyst at Wedbush Securities, expressed concern over Musk’s political journey, arguing that it could be detrimental to Tesla’s operations. He warned that Musk can’t stay on this political course unscathed, for either himself or the company at large.
In a recent note, Ives urged Tesla’s board to take action regarding Musk’s governance, stating, “The Tesla board MUST Act and Create Ground Rules For Musk. Soap Opera Must End.” Most notably, he called for oversight on Musk’s burgeoning political activities. He demanded a new settlement agreement that would give Musk some voting control in exchange for some mutually agreed-upon “guardrails” that would free Musk from needing a daily presence at Tesla.
In response to Ives’ recommendations, Musk responded bitterly on social media, instructing him to “Shut up.” This public exchange highlights the increasing animosity between Musk and Wall Street. They’re fearful that his political posturing might hurt Tesla’s competitive edge against other automakers entering the EV space. Fully earnings-driven changes Analysts have already started raising their projections for Tesla stock. William Blair downgraded Tesla from a buy to a hold, citing worries about how Musk’s political plans and the spending bill passed by Congress could negatively impact Tesla’s margins and electric vehicle sales.
Musk’s historical 2018 CEO pay package—worth an estimated $56 billion at the time it was granted—has faced criticism. Last year, the Delaware Court of Chancery voided the package over concerns about its structure and governance. Judge Kathaleen McCormick found that Tesla’s board was not independent from Musk and did not sufficiently negotiate with him.
The fallout from Musk’s political orchestration has started to make waves on investor sentiment. James Fishback, CEO of hedge fund Azoria Partners, announced a postponement in launching the Azoria Tesla Convexity ETF—a fund intended to invest in Tesla’s shares and options—due to uncertainties surrounding Musk’s political party initiatives.
Critics have lamented Musk’s newfound political viability. Media commentator Alex Kantrowitz warned that Musk’s tendency to self-sabotage threatens the America Party’s chances of success. He claimed that its prospects were potentially “doomed by his unfavorability.” Investors and stakeholders are joining the chorus of concern. They worry that his political aspirations would pull him away from, or undermine, his ability to lead at Tesla.
Musk’s recent shifts and statements represent a pivotal time for Tesla as it navigates both corporate governance and external pressures. In addition to Ives’ call for board intervention, discussions about merging with xAI—the artificial intelligence firm founded by Musk—have surfaced as potential moves that could further complicate his focus on Tesla.