Musk Must Go—Tesla's Stock Remains Tethered to Its Most Destructive Asset | Opinion

The notion that free markets efficiently allocate resources and correct leadership failures forms the backbone of American capitalism. Yet Tesla provides a stunning counterexample of market failure in action, as Elon Musk continues his reign as perhaps America’s most destructively distracted CEO while shareholders inexplicably tolerate the damage.

Tesla’s latest quarterly report reveals the company’s worst performance in years. These devastating results aren’t merely coincidental with Musk’s increasingly divided attention and polarizing political activities—they’re a direct consequence. In a rare acknowledgment of this reality, Tesla’s board reportedly initiated a formal search for Musk’s successor about a month ago, reaching out to several executive search firms to begin the process. Board members explicitly told Musk he needed to spend more time on Tesla and to publicly commit to doing so. While Musk said he will be “allocating far more time to Tesla” starting next month, this belated attention shift cannot undo the permanent brand damage his political activities have caused.

Here lies the central paradox and market failure: Despite overwhelming evidence that Musk’s leadership is actively harming Tesla’s operations, brand, and financial performance, the company’s stock valuation remains inextricably tied to his presence. Tesla stock continues trading at approximately 140 times forward earnings—a valuation far exceeding any other automaker and even most tech giants. This creates a perverse situation where removing Musk—the very action most likely to improve Tesla’s business fundamentals—would likely trigger a massive stock selloff and valuation collapse.

In a rational market, a CEO who delivers declining sales, shrinking margins, and alienates core customers while pursuing outside interests would see their company’s stock value decline until either performance improves or leadership changes. Instead, Tesla’s market value has become a cult of personality, with investors irrationally valuing Musk’s presence over actual business performance.

The problem extends far beyond Musk’s time allocation. His deep alignment with the Trump administration has fundamentally alienated Tesla’s core customer base—environmentally conscious, progressive-leaning consumers who once viewed Tesla as aligned with their values. Even if Musk returns full-time to Tesla tomorrow, these consumers won’t return—the brand transformation is irreversible as long as Musk remains at the helm.

Musk’s leadership failings aren’t newly discovered problems. His disastrous Twitter acquisition (now X) represents another cautionary tale. After purchasing the platform for $44 billion, he rapidly degraded its value through erratic management decisions, alienated advertisers through inflammatory rhetoric, and drained Tesla resources by bringing engineers from the automaker to shore up Twitter operations. During this period, Tesla shareholders watched their investment tank while their CEO was consumed by his new toy.

This irrational market behavior stems partly from the cult of personality surrounding Musk and partly from speculators betting on his promises of revolutionary artificial intelligence and robotics breakthroughs. These perpetually shifting future ventures—from the underwhelming Cybertruck to the promised Cybercab and Optimus robot—serve as convenient distractions from current operational failures his leadership is causing.

The consequences extend beyond Tesla shareholders. The company’s employees, customers, suppliers, and the broader electric vehicle industry all suffer from this leadership vacuum and brand degradation. The market’s irrational fixation on Musk’s presence over performance metrics has created a situation where the very recovery measures Tesla needs most—new leadership and a return to its core mission—are the ones least likely to be implemented due to fear of short-term market reaction.

This represents perhaps the purest example of market failure in modern corporate governance: a company whose operational success requires leadership change but whose stock valuation paradoxically depends on maintaining failing leadership. Until investors begin valuing Tesla based on fundamentals rather than founder worship, this dysfunctional dynamic will persist—trapping Tesla in a cycle of deteriorating performance while preventing the very leadership change necessary for its revival.

The solution is clear but contradicts market incentives: Musk must go. While his departure would temporarily shock Tesla’s stock price, it would begin the essential process of rebuilding the company’s core business, repairing its brand, and restoring its original mission. The current situation—where the market irrationally rewards the very leadership causing Tesla’s decline—represents the ultimate failure of capitalism’s self-correcting mechanisms.

Nicholas Creel is an associate professor of business law and ethics at Georgia College and State University.

The views expressed in this article are the writer’s own.