Tesla Continues Its Downfall With Job Cuts

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Tesla has had a terrible year. It’s been the worst performing stock of 2024, down more than 36% since Jan. 1, with a 40% year-over-year profit decline in its most recent earnings report. Elon Musk’s trailblazing electric vehicle company, part of the “Magnificent Seven” big tech stocks that often buoy the rest of the market, has weighed it down considerably so far this year. The company’s stock was close to a 12-month low this morning, and its valuation dipped below $500 billion—a far fall from exceeding $1 trillion in late 2021.

And things are continually getting worse for Tesla. On Monday, the company announced it was cutting 10% of its workforce, or more than 10,000 employees. “There is nothing I hate more, but it must be done,” Musk explained in a staff memo, first reported by Electrek. “This will enable us to be lean, innovative and hungry for the next growth phase cycle.”

Tesla seems to have been struggling to find that growth. Growth in the electric vehicles category has proven much more sluggish than anticipated. In the first quarter of 2024, EV sales in the U.S. were 2.6% higher than a year before, but 15.2% lower than Q4 2023, according to Cox Automotive. It’s not just in the U.S., either. Europe’s expected EV adoption rate was recently dialed down in a UBS report, with about 9 million fewer anticipated purchases between now and 2030. The high initial cost, lower range and difficulty of charging are making consumers less likely to buy electric vehicles.

In Tesla’s case, the cost of an electric vehicle may be even further outside of what is considered affordable. Earlier this month, Reuters reported Tesla was killing a more affordable EV project and putting more resources toward robotaxis. In X posts, Musk said Reuters was “lying,” but he immediately touted the robotaxi unveiling on Aug. 8. Forbes senior contributor Peter Cohan analyzed this move, pointing out that a Tesla robotaxi is unlikely to boost growth. After high-profile wrecks involving Waymo robotaxis, many people are leery to try them. And, as lawsuits have indicated—including one Tesla settled last week—Tesla’s self-driving technology leaves much to be desired.

It’s not clear what the future holds for Tesla, but considering Musk’s tight hold on the company and its board of directors, his decisions alone are likely to determine what happens next at the EV maker.

ECONOMIC INDICATORS

In March, inflation was higher than anticipated for a fifth straight month, as higher prices continue to linger. According to the consumer price index, prices last month were 3.5% higher than a year before, above both February’s 3.2% inflation rate and economists’ estimate of 3.4%. Most economists now think interest rates will likely remain unchanged until the July Federal Reserve Board meeting at the earliest, according to CME FedWatch.

But inflation isn’t the only thing roiling the markets. Tensions in the Middle East ratcheted up considerably in recent days following Iranian missile and drone strikes on Israel, and Israel’s vows to retaliate. The S&P 500 hit its lowest level in two months on Monday, as many investors sold off stock on Monday, dropping the S&P 500 1.2%, the Dow Jones Industrial Average 0.7%, and the Nasdaq 1.8%. Short and long-term government bonds saw yield increases and investors scrambled for something less uncertain.

LEGAL ISSUES

Last month, workers at AT&T sued the company for pension de-risking: selling off its pension obligations to Athene Annuity and Life Company. This action, which essentially transfers the responsibility of paying pensions to another company through long-term contracts to make payments to retired employees, has been gaining popularity recently as companies look for ways to shore up their financial future, but Forbes senior contributor Teresa Ghilarducci explains the move is hazardous for employees and retirees. These insurance annuity companies may have risky investments and may not be required to disclose their finances. There’s little in federal law in the way of pension guarantees for employees whose funds have been sold to insurance providers. In the case of the AT&T lawsuit, four former participants in the plan accuse the company of making $363 million in profit from a May 2023 pension risk transfer to Athene Annuity and Life, which they say does not have a stable portfolio and puts pensions of 96,000 retirees and beneficiaries at risk.

AT&T isn’t the only company to have made a recent pension risk transfer. Verizon completed a $5.9 billion transfer of 56,000 pensions to group insurance annuities with Prudential Insurance and RGA. In the fourth quarter of 2023, total pension risk transfer sales totaled $12.7 billion, according to LIMRA.

POLICY + REGULATIONS

While yesterday was the deadline for filing personal income tax, the IRS is looking toward the future. Last week, it issued proposed regulations for a new 1% excise tax for businesses on stock buybacks. The tax was codified as part of the Inflation Reduction Act of 2022, and the Joint Committee on Taxation estimates it will raise $74 billion over 10 years. (President Biden’s budget has called for the tax to increase to 4%, writes Forbes senior writer Kelly Phillips Erb, which would increase that 10-year raise to $265 billion, according to the Penn-Wharton Budget Model.) According to the proposed regulations, the tax will impact publicly traded domestic corporations in many stock repurchasing scenarios with a fair market value of $1 million or more, as well as some foreign corporations. Written comments on the proposed regulations, which are broken into two parts, need to be submitted by mid-May or mid-June.

DEEP DIVE

Docusign Wants You To Know It’s More Than Just An E-Signature Company

Docusign isn’t just about electronic signatures anymore. Forbes senior writer Richard Nieva spoke to CEO Allan Thygesen about Docusign’s new direction: expanding to total online contract management. Docusign’s new suite of tools, which it calls its Intelligent Agreement Management platform, is aimed at making it easier to notarize documents, generate new contracts and analyze vendor agreements. A Deloitte study commissioned by Docusign found $2 trillion in economic value is lost each year due to outdated contract systems—not having a platform to search and store contracts wastes an additional 25,000 hours a year on average, and the study found old contract systems add an average of two more weeks to contract closure times.

“Once an agreement is signed, it goes into a deep, dark place. It used to be a filing cabinet, now maybe a digital file folder,” Thygesen told Nieva. “Agreements, I think, are one of the final frontiers of enterprise software.”

The new platform has three separate products. Navigator is a repository for companies to store and manage contracts. Navigator has AI capabilities that can scan contracts for inconsistencies, find underperforming vendors, and identify trends to negotiate better deals. Maestro helps customers build out user workflows with features including e-signatures, ID verification and data verification from third-party apps. The App Center allows users to integrate outside services, including Stripe and HubSpot, into the Docusign IAM platform.

Docusign is one of the older Web 2.0 tech businesses still around, founded in 2003 by a trio of entrepreneurs. It went public in 2018 and saw its sales pop during the Covid-19 pandemic—its share price spiked more than 600% from summer 2019 to its September 2021 high. Thygesen, who spent more than a decade working for Google’s ad business, became Docusign CEO in October 2022. Building out the IAM platform was one of his top priorities for several reasons, he told Nieva.

“Both the opportunity and the necessity to rekindle higher growth is what’s driving this,” Thygesen said.

FACTS + COMMENTS

While the stock market as a whole has shown volatility in the last week, Big Tech has largely been successful. Amazon hit a record share price on Thursday and edged closer to a $2 trillion valuation after CEO Andy Jassy’s annual letter to shareholders detailed the company’s progress and potential in generative AI.

$189.77: Amazon’s record share price

22%+: Year-to-date increase in Amazon stock

‘Much of this world-changing AI will be built on top of AWS’: Jassy wrote in the shareholder letter

VIDEO

How Justin Ishbia Built One Of America's Most Successful Private Equity Firms

STRATEGIES + ADVICE

Meetings are an important part of getting things done at work, but it’s hard to plan meetings that are productive, both in terms of accomplishing tasks and utilizing employees’ time. These tips will help you plan and lead meetings that matter.

The labor market is tight right now, but there are ways to make that work to your company’s advantage. Here are some profit opportunities for times like this.

QUIZ

Billionaire Mark Cuban said in an X post this week that “paying your taxes is the most patriotic thing we can do.” How much did he pay this year?

A. $100,000

B. $0

C. $7 million

D. $276 million

See if you got the answer right here.