Editor’s Note: History is littered with cautionary tales of people who blindly followed charismatic leaders to disastrous outcomes. Whether it’s an eccentric preacher promising the end of days, or a billionaire CEO orchestrating the narrative of a visionary, cult leaders invariably bring followers to their doom. Investors, beware.

Time and again, Wall Street falls head over heels for a messianic figure, convinced they can do no wrong—until reality rears its ugly head, and the faithful swap their Kool-Aid for worthless stock.

Naturally, this leads us to electric vehicle (EV) maker Tesla (NSDQ: TSLA) and its headline-grabbing CEO, Elon Musk.

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Smoke and mirrors…

“Pay no attention to the man behind the curtain” is a famous line from the 1939 movie The Wizard of Oz. The “wizard” says these words when Dorothy and Toto discover the man controlling the fearsome images.

For years, Elon Musk has worked the media’s levers to project an image of himself as a genius inventor and entrepreneur. But his claims to be an inventor are not accurate.

You might be surprised to learn that Elon Musk has never invented anything noteworthy. He certainly didn’t invent the EV. He didn’t pioneer any next-generation battery technology. He didn’t even create the company.

Tesla was founded in 2003 by engineers Martin Eberhard and Marc Tarpenning. Musk pumped money into Tesla as an investor, when the firm already existed, and then used strong-arm tactics to oust Eberhard and Tarpenning.

There was a time when investing in Tesla felt like getting in on the ground floor of the future. Elon Musk, self-proclaimed genius and part-time rocket enthusiast, was the face of a company that promised to revolutionize transportation.

Fast forward to today, and Tesla’s sales are cratering worldwide. The once-loyal customer base—largely composed of eco-friendly progressives—has been alienated by Musk’s embrace of far-right politics. They’re abandoning the Tesla brand and even organizing boycotts against it.

Tesla’s challenges have accelerated this year. The stock initially surged after the U.S. presidential election, driven by expectations that Elon Musk’s ties to President Donald Trump would prove advantageous. But the “First Buddy” premium has quickly evaporated.

Investor optimism waned in January after the company posted weak fourth-quarter delivery figures, marking its first annual sales decline in more than a decade. A subsequent earnings report revealed weaker-than-expected quarterly profits, coinciding with Tesla’s decision to scale back its 2025 sales forecast.

Meanwhile, Chinese automakers are cranking out superior EVs at a fraction of the cost. The result? A brand that was once the pinnacle of tech-cool has become radioactive. Unsold inventories of Teslas sitting in parking lots across the U.S. have become so large, some are now visible from satellites in space.

Read This Story: Tesla Sags as Musk Lollygags

For years, Tesla’s stock price was propelled not by solid financials but by the gravitational pull of Musk’s personality cult. Now, that pull has reversed, and the stock is headed for a black hole. Investors who ignored Tesla’s deteriorating fundamentals—shrinking margins, increased competition, and a CEO more focused on posting conspiracy theories than running a company—are now paying the price.

This week, Tesla’s market cap fell below $1 trillion for the first time since November. Tesla’s shares are currently down about 40% from hitting an all-time high in December. Most analysts have turned bearish in their long-term outlook for TSLA’s share price.

The following price chart tells the grim story (with data as of market close Friday, February 28). The stock bounced higher Friday, in the wake of favorable U.S. inflation data, but the extended trend is clear:

Elon Musk was born into a massive fortune in apartheid South Africa and has promoted himself as a reincarnation of Tony Stark. He has used his wealth and public relations acumen to secure huge government subsidies for his ventures, such as the privately owned SpaceX.

This is hardly the first time Wall Street has fallen for a CEO who seemed larger than life, only for their downfall to take shareholders down with them. Let’s take a stroll down memory lane.

The Steve Jobs Wannabes

Apple (NSDQ: AAPL) under Steve Jobs was the rare example of a charismatic CEO whose brilliance was actually backed by execution. But for every Jobs, there’s a long list of pretenders.

Remember Elizabeth Holmes of Theranos? Investors threw billions at a company that promised to revolutionize blood testing—until it turned out the whole thing was a fraud. Instead of sitting for another fawning interview, Holmes is now sitting in a jail cell.

On February 24, a U.S. appeals court upheld the conviction of Theranos founder Elizabeth Holmes, who is serving more than 11 years in prison for defrauding investors with false claims about her company’s blood-testing technology. Holmes once graced the covers of major business and fashion magazines.

Also consider the charismatic Israeli-American billionaire Adam Neumann of WeWork, who convinced investors that leasing office space was somehow a high-growth tech business. WeWork went bankrupt on November 2023. Before the bankruptcy, WeWork was once valued at around $47 billion.

Then there’s Jack Dorsey, the monk-like billionaire and Twitter co-founder, who sports a beard longer than his list of actual managerial achievements. Twitter (before Musk finished the job of destroying it) stagnated under his tenure. The fintech company Square, which he co-founded, is now called Block (NYSE: XYZ) and has struggled under his tenure as chairman, due to his scattered focus.

Another cautionary tale: crypto entrepreneur Sam Bankman-Fried, founder of the now defunct crypto exchange FTX, who was sentenced in March 2024 to 25 years in prison for a massive fraud on hundreds of thousands of customers.

Read This Story: Your Guide to Criminal Capitalism: How to Spot The Next FTX

There was a time when the tousle-haired Bankman-Fried was the poster boy for “crypto bros.” At the peak of his net worth in 2022, he was ranked the 41st-richest American in the Forbes 400. He was known for being a contrarian and wearing shorts to business meetings. Now he’s wearing a jailhouse jumpsuit.

The upshot? Fundamentals matter. A great CEO can create value, but they should never be the sole reason to invest in a company. If you’re putting money into a business, focus on earnings growth, balance sheet strength, market position, and product quality—not on whether the CEO gets softball interviews on CNBC or has a loyal army of online fans.

Beware of companies where the CEO is the main asset. Because when that asset depreciates, so does your portfolio.

Got an opinion or question? You can reach John Persinos via email at: mailbag@investingdaily.com

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