Elon Musk's net worth drops $12.6 billion amid chaotic week for Austin-based Tesla

Elon Musk's wealth slumped $12.6 billion amid a chaotic week for the billionaire and his collection of companies. His week wrapped up with a group of investors accusing Austin-based Tesla of mismanagement.

Since Wednesday, Musk — whose business empire consists of five companies, many of which have a presence in Central Texas — has had a turbulent few days that included a less-than-stellar Tesla earnings call, policy changes at Twitter and a rocket launch by his aerospace company SpaceX that ended in an explosion.

The week was capped with a letter sent Friday by a group of 17 Tesla investors who together hold more than $1.5 billion in company stock. The letter raised concerns about Musk's ability to be an effective CEO as he runs the rest of his empire. The letter also accused the board of not controlling the CEO.

Stock prices for Tesla, Musk's only publicly traded company, dropped nearly 12% last week, helping send Musk's personal wealth, which is largely tied up in Tesla stock, down.

The Bloomberg Billionaires Index, which ranks the daily wealth of the world's richest people, showed that Musk lost $12.6 billion Thursday. The drop is the most the billionaire has seen this year. Still, Musk easily remains the second-richest person in the world, behind only Bernard Arnault, the CEO of French luxury goods maker LVMH, which owns Louis Vuitton, Tiffany and other brands. As of Friday evening, Musk was worth $164 billion and Arnault was worth $211 billion.

Tesla sees 24% drop in net income, multiple rounds of vehicle price cuts

Musk's chaotic week

Tesla's stock drop followed a quarterly earnings report and meeting Wednesday evening for the electric carmaker's first quarter as it reported a 24% decrease in net income last quarter. The drop came amid multiple rounds of vehicle price cuts this year that tightened profit margins. On Wednesday, Musk said the cuts are likely to continue. They have come as competition in the electric vehicle market has heated up.

On Thursday morning, SpaceX launched its first orbital flight of Starship, and though the rocket got off the ground, it suffered a fiery explosion four minutes into the test flight. Musk touted the launch as exciting and a learning experience, but the rocket is designed to reach the Moon and Mars, and its failure showed how far the company needs to go before those lofty goals can be reached.

Watch: SpaceX's Starship successfully launch then explode

That same day, Musk's notable problem child, Twitter, which he acquired in October, stirred up new controversy when the platform eliminated verification status for its legacy accounts, an action that Musk had promised to take but had pushed back several times. The platform eliminated a checkmark that verified the identity of accounts for nonpaying subscribers and eliminated marking for government accounts and public figures, including the pope and President Joe Biden.

Now any users with a blue verification mark are those who pay for an $8 monthly subscription to Twitter Blue and verify their phone number or organizations that pay $1,000 a month. Musk also paid for a few select accounts himself, including for LeBron James and William Shatner, who both publicly said they would not pay for Blue.

On Friday, Twitter also quietly took labels that implied government oversight or involvement off of accounts that had been labeled as "Government-funded" and "China state-affiliated," according to a report from Reuters.

What did the letter say?

On Friday, the Tesla investors raised a number of concerns, stating that the board of directors is "failing to adequately represent the interests of Tesla’s shareholders" and had a "meager oversight" of Musk. Their letter said the same for other aspects of corporate strategy, including the company's approach to human rights and labor rights, which the investors said brought legal, operational and reputational risks.

"The board has allowed the CEO to be overcommitted at a time when the company faces critical challenges, including increased competition, regulatory scrutiny, and a stock slide," the letter said.

As a result, the investors asked for a meeting by May 25 to discuss concerns and made several requests of the board. They asked that the board ensure the company has a CEO who dedicates adequate time and attention to the company and make a plan to overhaul board member compensation, including rotating out members with close ties to Musk. They also asked for either a policy that limits the CEO's outside commitments or a CEO succession plan.

The letter also pointed out that as of April 3, Tesla had lost $582.4 billion in market capitalization since Musk disclosed his stake in Twitter about a year before, and it said Tesla is losing market share on electric vehicles as automakers launch comparable models at similar or lower price points.

Austin-based Tesla: Advocates say workers faced wage theft, other violations as factory was built

The investors also cited a number of concerns related to human and labor rights, including incidents at Tesla's southeastern Travis County manufacturing facility. The letter listed allegations of incidents related to unsafe working conditions, wage theft and falsified certificates of safety training in Tesla's Austin facility, and it linked to media reports. It also cited complaints about Tesla's factory in Fremont, Calif., including allegations of racial discrimination and a hostile work environment, as well as allegations of union busting in New York.

The letter accused Tesla of embracing a culture of being “above the law” and mentioned probes by the U.S. Department of Justice as well as investigations by the National Highway Traffic Safety Administration and the California Department of Vehicles related to Tesla’s controversial self-driving software.

"Instead of working to address problems with regulators, CEO Musk has made derogatory tweets and comments, fueling tensions," the letter said.

Concerns likely to stay

Concerns that Musk has been stretched too thin have been raised before, particularly since he purchased Twitter.

Dan Ives, an industry analyst with Wedbush Securities, said the scrutiny is likely to continue.

"This is a careful balancing act for Musk as he is juggling a lot of balls at the same time with Tesla, SpaceX and Twitter," Ives said. "Investor scrutiny will continue to grow around Musk with a pivotal year for Tesla looking ahead."

Mapping Musklandia: A guide to Elon Musk-related activity in the Austin area

The criticism comes as Musk has increasingly moved and expanded his business empire into Central Texas. In 2020, the billionaire confirmed he had moved to Texas to be closer to SpaceX's South Texas site and Tesla's Austin manufacturing facility.

Musk also has moved the headquarters of Tesla and the Boring Co., a tunneling and infrastructure firm, to Central Texas, along with his private foundation. He has set up offices in the region for SpaceX and his neurotechnology company Neuralink. Musk has also hinted about putting a second Twitter headquarters or office in Texas in the past but so far has made no public moves to do so.

This article originally appeared on Austin American-Statesman: Elon Musk's wealth drops $12.6B; investors raise concerns about Tesla