It’s fair to say that Tesla isn’t doing so well. Thanks to an ageing lineup and
a ket-fuelled, government-destroying, Nazi-saluting CEO, Tesla sales are
plummeting across the entire globe. Their revolutionary 4680 battery has
failed to materialise and is now obsolete. Their Cybertruck is such a sales
flop that they are already pulling its manufacturing capacity. Thanks to
Musk’s dogmatic “vision only” approach to self-driving, Tesla FSD is far
from being an industry leader and miles away from being functionally safe.
As a result, Tesla’s Cybercab and self-driving revolution is now all but
confirmed as vapourware. Everything that once made Tesla one of the
highest-valued companies is falling apart. It looks like Tesla is spiralling
towards death. But can such a giant really die? Oh yes, and this is how.
Let’s start with the reality of Tesla.
In 2024, Tesla’s annual net income was only $12.6 billion (though some
sources put it as low as $7 billion). The vast majority of this was from their
car sales. However, as of the time of writing, Tesla is valued at $852.43
billion! That means its P/E ratio (a ratio of company value to its net income,
used to determine if the company is over or undervalued) is a staggering
67.65!
Let’s compare that to Toyota. They are far larger than Tesla and have far
more impactful upcoming EV and self-driving technology than Tesla. Last
financial year, their net income was a massive $29 billion! However, they
have a much more realistic value of $243.56 billion, giving them a P/E ratio
of 8.40, which is close to the average for the automotive world.
By comparison, Tesla’s value makes no sense. It offers nothing that Toyota
doesn’t also offer. The only reason Tesla is so stupidly valuable is because it
is treated as a speculative meme stock.
But, as we have seen in recent weeks, the reality of Tesla’s sales slipping
cuts through this speculation and causes mass stock sell-offs. This, in turn,
diminishes its ability to be seen as a speculative stock and forces many
investors to reevaluate their position based on reality.
So, how much would Tesla be worth if it was valued realistically by the end
of 2025?
Currently, its sales are down 45% in the EU and 49% in China, and these
numbers are predicted to fall even further. So, let’s be generous and say
that over the course of this year, Tesla’s sales and net income will fall by
45%. Let’s also be generous and say that it is valued at the same P/E ratio
as Toyota, even though Toyota is larger, has a bigger cash surplus, better
upcoming technology, a stronger market share, etc.
This would give Tesla a net income of $6.93 billion and a total valuation of
$55.44 billion. That is just 6% of what Tesla is worth at the time of writing,
and it has already lost over a third of its value over the past few months.
This is not some hypothetical pessimistic projection; it is a realistic valuation
based on optimistic numbers for Tesla.
This valuation would be catastrophic for any investors, but it also would be a
death knell for Tesla itself.
You see, Tesla’s insane valuation over the past few years has enabled the
company to take on a ridiculous amount of debt.
As of writing, Tesla has at least $48.39 billion in debt.
However, Musk has also used his Tesla stock as collateral for SpaceX,
Twitter, and Tesla loans. Before he bought Twitter, over half of his shares
were collateralised; now, that figure is far, far higher. Again, let’s be
generous and assume only 70% of his 12.8% stake in Tesla is collateralised
in this way, with a third of these loans for Tesla. That would mean Musk has
$71.68 billion in personal loans, with $23.89 billion for Tesla.
These loans aren’t accounted towards the company’s liabilities, as they are
technically part of the debt owner’s — in this case, Musk’s — personal
liabilities.
In other words, Tesla actually has $72.28 billion in debt. That is more than
the company is realistically worth!
And it gets worse. If a collateralised stock loses too much of its value, the
lender can issue a “margin call” and recall the loan. After all, the security for
the loan no longer exists. This would happen if Tesla lost 94% of its value,
and Musk would have to rustle up all that $71.68 billion debt.
But how can he pay for that? Twitter is already in negative equity, in that it
owes more than it is worth. He could sell his SpaceX shares, valued at
roughly $147 billion, but SpaceX isn’t doing so well either, with Starlink
being far from breaking even and Starship being a total mess. Not to
mention that many of these shares are likely collateralised too. On top of all
that, if Musk sold a considerable stake in SpaceX, its value would plummet.
It’s not guaranteed Musk can pull enough equity out of SpaceX to pay for all
of this. It goes without saying that if Tesla were valued properly, it would
also be in negative equity.
Musk would have no way of paying for any of this. He would either need to
be bailed out by a private investor or let the banks liquidate the assets of
these companies. After his bullshitery in the White House and apparent
ineptitude at running his companies, do you really think a private investor
would want to bail out this mess?
This is how Tesla and Musk’s entire empire dies.
Firstly, Tesla sales dramatically drop globally, tanking the stock price.
Then, one of three options occurs: Tesla fails to deliver the Cybercab, Tesla
delivers a Cybercab that is wildly dangerous, or a superior competitor beats
Tesla to the market, causing the speculative value of Tesla to disappear.
After that, Tesla’s value plummets to a realistic level, roughly 94% lower
than it is today, putting Tesla into negative equity.
Musk’s collateralised loans are called, as lenders worry that their billions of
dollars are at stake.
Musk can’t pay, and private investors won’t raise enough to bail him out.
The banks force liquidation of all of Musk’s companies, including Tesla.
How realistic is this prediction? It’s hard to say. In our modern, unreal
economy, Musk’s collateralised loans might not be called if Tesla lost that
much value. Moreover, some investors see Musk as a point of control, not a
point of profit, so they are happy to back him even if it loses them huge
piles of money. The investors might not want to force a liquidation, as they
will only get a fraction of their money back. Heck, Trump might even step in
and bail out Musk as his cars and rockets are “vital to America.” But, even if
these factors managed to prevent the total failure of Tesla, the company
would have still died. The hope, optimism, and hype it once thrived on will
be gone, and because Musk can’t make billions from Tesla speculation, he
will lose interest and let the company rot.
Either way, this shows that Musk isn’t really the wealthiest man on the
planet. A single dose of optimistic reality and his entire empire comes
crumbling down. The emperor has no clothes. Do you see why he is
distracting you? Why he looks so frantic? Musk is terrified of reality because
it means the end for him.
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