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How Much will Elon Musk’s Divorce Cost Tesla Motors Inc (TSLA)?

Elon Musk Tesla Motors Inc (TSLA) and SolarCity Corp (SCTY)

Tesla Motors Inc Elon Musk is going through another divorce and it seems that the man is plagued with fictional seven wives brouhaha. Breaking news on Monday revealed that Musk’s current wife (he’s had others in the past) actress Talulah Riley has filed for divorce in Los Angeles. Thousands of people go through divorce each day and it doesn’t make headlines; however, if you happen to be the CEO of a firm that wants electric cars to take over our roads, your personal stuff could end in public domain.

Elon Musk Tesla Motors Inc (TSLA)

The news of Musk’s potential divorce is particularly worthy of attention because of how it could affect Elon Musk’s financials and by implication, the financials of Tesla Motors. When most people file divorce proceedings, they usually fight over who gets the house, car, and how joint assets are shared, among other things. The situation is not different in Musk and Riley’s case, except that the soon-to-be ex wife is going for Musk’s jugular with an alleged $13B settlement.

What will Elon Musk’s divorce cost Tesla?

Issues on the home front usually affect the performance of workers in firm – it matters not if they are junior staff or top management. In fact, studies have shown that there is a direct correlation between a CEO’s divorce and the performance of his/her firm. In 2013, a longform piece on the impact of CEO divorce on shareholders was published on the Harvard Law School Forum on Corporate Governance and Financial Regulation website.

The authors noted that shareholders shouldn’t ignore the personal lives of CEOs and that events in the personal lives of CEOs can influence investment decisions. The authors noted that a divorce could affect a CEO and his firm in three major ways.

The first is that a “CEO with a significant ownership stake in a company might be forced to sell or transfer a portion of this stake to satisfy the terms of a divorce settlement”—it is worthy of note that Musk has a huge stake in Tesla Motors .  The second effect is that “divorce can affect the productivity, concentration, and energy levels of the CEO.” The third effect is that a “divorce can influence a CEO’s attitude toward risk; depending on how the divorce settlement is financed.”

How much will a divorce cost Musk?

Elon Musk might turn out to be the exception and not the rule but the circumstances surrounding his relationship with Riley suggests otherwise. To start with, Elon Musk had been through what was regarded as America’s messiest divorce when his marriage to Justine Musk crashed. As if that was not enough, Musk has been married to Talulah Riley twice and it seems he will be divorcing her twice as well.

Musk and Riley were first married in 2010 before they divorced in January 2012. They got married again in July 2013 and Musk filed for divorce in January 1, 2015 with an offer to pay her $16M in cash as agreed in the prenup. That January 2015 divorce was dismissed in April 2015 but it seems Riley only took a retreat to regroup. Now, Riley has filed for divorce, she is not talking about a prenup, she wants spousal support, attorney fees, and Musk might have to write a $13B check. Musk has 30 days to respond to the court filing but it is unlikely that Tesla Motors  investors will wait that long before voting on the matter with their funds.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.