Tesla – the world’s largest electric car making giant – became the most valued auto manufacturer of America last week when an increase in its share price saw it overthrow car making giant ‘General Motors’. Last Monday, the stock market closed with the market value of Tesla at $50.9 billion, around $64 million more than General Motors.
Despite a soar in share price, Tesla investors aren’t happy
Tesla sold nearly 76,000 vehicles last year whereas the General Motors sold around 9.6 million vehicles in 2016. Even after selling more vehicles than the electric car making giant, General Motors had to see a low market value in comparison to Tesla Motors. The electric car maker overtook Ford Motors earlier this month as well.
Now, the top automakers standing before Tesla in terms of market value are the non-American companies like Honda and Toyota. The elevated profile of the car making giant with investors has brought both praise and a certain level of scrutiny. Last week, a group of investors questioned the independence of board of the EV making company even after the increasing share price of Tesla Stock. According to the five investors, the board of the automaker required some independent board of directors who had no relation to the Chief Executive Officer of Tesla – Mr. Elon Musk.
The investors said in a letter that the board of the automaker was “largely unchanged” since the automaker came to market and “was at risk of groupthink.” The investors who wrote the letter to Antonio Gracias, the lead independent director of Tesla, collectively manage assets worth $721bn or £575bn. The shareholders include the Hermes Equity Ownership Services, the CtW Investment Group, and the California State Teachers’ Retirement System, among others.
Most investors value Tesla Stock as a tech growth stock instead of an automaker: Analyst
The letter to the director said, “While meeting the technical definition of independence, five of the six current non-executive directors have professional or personal ties to Mr. Musk that could put at risk their ability to exercise independent judgment.” The shareholders want the automaker to review its governance before releasing its Model 3 later this year.
In answer, the automaker said that it was already searching for capable independent directors. Last year, the automaker narrowly missed its delivery target of 80k vehicles. Also, since its brief history, the company reported just two profitable quarters. This year, the electric car making giant is expected to lose more than $950 million whereas General Motors is expected to earn more than $9 billion and Ford Motors is expected to make profits of over $6.3 billion.
According to many analysts, most of the shareholders are valuing the Tesla Stock as a technology growth stock instead of an electric car manufacturer. Morningstar’s analyst David Whiston said, “The market cares more about the potential new market value of the other businesses Tesla is in than about real profits and cash flow. Right now there is nothing to slow Tesla’s momentum. They could pass Honda too.”