Al Root, Anita Hamilton and Callum Keown
It's happening.
President-elect Donald Trump announced Tuesday evening that Tesla CEO Elon Musk and former Republican presidential candidate Vivek Ramaswamy will lead what Trump calls the Department of Government Efficiency, or DOGE. The name is a reference to Dogecoin, a cryptocurrency Musk has talked about in the past.
What Is the Department of Government Efficiency?
In a statement, Trump said: "Together, these two wonderful Americans will pave the way for my Administration to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies." Trump said Musk and Ramaswamy will provide "advice and guidance" and partner with the White House and Office of Management & Budget, with the goal of creating a "smaller government with more efficiency and less bureaucracy."
It's important to note that a department can't be created without congressional approval. Without that, DOGE will be a department in name only and act more like a consulting firm.
Trump compared the initiative to The Manhattan Project, the research program during World War II that was responsible for creating the first nuclear weapons.
Musk said in the statement that "this will send shockwaves through the system, and anyone involved in Government waste, which is a lot of people."
Who Is Ramaswamy and What Does He Add?
Billionaire entrepreneur Ramaswamy won Musk's praise back when he was campaigning to be the Republican nominee for president in 2023. At the time, Musk called him " a very promising candidate."
He also has ties to his fellow Ohioan, Vice President-elect JD Vance, who he met and befriended at Yale Law School. Ramaswamy has an undergraduate degree in biology from Harvard and has called himself a " scientist." He co-founded biotech firm Roivant Sciences, where he currently holds around 7% of shares and is currently a co-founder of an asset management firm in Columbus, Ohio.
During his candidacy Ramaswamy's campaign slogan was "truth." Among those truths were that "capitalism lifts people up from poverty" and that the constitution "is the strongest guarantor of freedoms in history."
Most recently, he has become an activist investor in BuzzFeed, acquiring an 8.6% stake. Along with pushing for more conservative voices on the site, he has advocated for a complete overhaul of the media company, a tone that evokes the same ethos as Trump's government efficiency drive.
"Cutting around the edges will not work. You require a complete, ground-up re-think of every single piece of content being produced at the company," he wrote in a letter to the BuzzFeed board back in May.
On Wednesday, Ramaswamy doubled down the message, writing on X "slapping the bureaucracy on the wrist won't solve the problem, the only right answer is a massive downsizing."
How Long Will Musk, Ramaswamy Serve?
Trump said the DOGE's work is slated to wrap up by July 4, 2026, on the 250th anniversary of America's independence.
What It Means for Tesla Stock
Tesla investors have to decide if Musk's new role is a problem for the electric-vehicle company. They don't appear to think so judging by today's stock reaction. Tesla shares up 3% in early trading at $338.19, while the S&P 500 was flat and the Dow Jones Industrial Average was up 0.1%.
For Tesla investors, the prospect of distraction for management pops up from time to time. Tesla stock performed poorly when Musk bought Twitter, now called X. Questions about Musk's level of engagement surfaced again early in 2024 after a judge voided his 2018 pay package close to the time Musk created his AI company xAI.
This is another one of those moments. The fact that Ramaswamy is involved as well could be a positive for Tesla investors. Musk is sharing the load. What's more, fewer regulations also have the potential to benefit Tesla and SpaceX operations, according to many Wall Street analysts.
Tesla didn't immediately respond to a request for comment about Musk's time commitment.
"Since this is not an official Cabinet or U.S. government position and it's essentially newly created, there will be NO changes to Musk's CEO roles with Tesla and SpaceX," wrote Wedbush analyst Dan Ives in a Tuesday. "This is another indicator that Musk will have a major seat at the table in the White House and ultimately this is a positive for Tesla as Trump will fast-track the autonomous and AI initiatives in our view over the next 12 to 18 months."
He was also pleased Ramaswamy will be there to help share Musk's workload.
Ives rates Tesla stock Buy and has a $400 price target.
Ives is positive, but there will likely be headwinds. "There are many obvious conflicts with most of Musk's numerous business ventures," says Carl Tobias, Williams Chair in Law at the University of Richmond. DOGE might work with "established federal entities with rules and bureaucracies that are anathema to Musk and with whom he is constantly in conflict and litigation."
Coming into Tuesday trading, Tesla stock had risen for five consecutive days, gaining about $107 a share, or 44%, over that span. The company's market value rose by $344 billion.
The streak "was by far the best four-day run since the Covid lows in March 2020 and one of the stock's biggest four-day gains in its history, " said CappThesis founder and market technician Frank Cappelleri. "So, it was due to take a breather."
Write to Al Root at allen.root@dowjones.com, Anita Hamilton at anita.hamilton@barrons.com and Callum Keown at callum.keown@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 13, 2024 12:27 ET (17:27 GMT)
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