Market punishes Tesla for turmoil

New exec quits; stocks fall 6.3%

Tesla shares dropped sharply Friday after the electric-car company disclosed that its chief of accounting was leaving the company only weeks after coming aboard.

The upheaval in the executive ranks emerged hours after the company’s chief executive, Elon Musk, appeared live on YouTube taking a deep drag on what appeared to be a marijuana cigarette during an interview with comedian Joe Rogan, an advocate for legalizing marijuana.

Tesla’s shares slumped 6.3 percent to close at $263.24 on the New York Stock Exchange.

The hiring of the accounting chief, Dave Morton, had been announced days before Musk abruptly took to Twitter last month and declared that he was planning to take Tesla private and had “funding secured.”

But overnight Tesla disclosed in a regulatory filing that Morton had resigned Tuesday.

“Since I joined Tesla on Aug. 6, the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations,” Morton said in a statement included in the filing. “As a result, this caused me to

reconsider my future. I want to be clear that I believe strongly in Tesla, its mission, and its future prospects, and I have no disagreements with Tesla’s leadership or its financial reporting.”

Morton had been hired from the data storage company Seagate to replace Eric Branderiz, who left Tesla in March.

Nearly a dozen top executives have left Tesla this year. Sarah O’Brien, vice president for communications, and Gabrielle Toledano, the head of human resources, have departed in the last few weeks. Susan Repo, the treasurer and vice president for finance, left in March.

The upheaval that began with the abortive bid to take the company’s shares off the public market has deeply dented Tesla’s stock — the shares have lost almost one-third of their value since early August — and brought new scrutiny of Musk’s behavior and managerial fitness.

The attention intensified

overnight after his interview with Rogan, where the repartee included an exchange over what Musk was smoking.

“Is that a joint or is it a cigar?” Musk asked after his host took out a large joint and lit it up.

“It’s marijuana inside of tobacco,” Rogan replied and asked if Musk had ever had it.

“Yeah, I think I tried one once,” he replied, laughing.

The comedian then asked if smoking on air would cause issues with stockholders, to which Musk responded, “It’s legal, right?” and then proceeded to take a puff. Marijuana is legal for medical and recreational use in California, where the interview was recorded.

After Musk announced Aug. 7 that he intended to take Tesla private at $420 a share, there was speculation that the billionaire was referring to marijuana when he tweeted because “420” is a coded reference for marijuana. Musk denied the allegations.

“It seemed like better karma at $420 than at $419,” he said. “But I was not on weed, to be clear. Weed is not helpful for productivity. There’s a reason

for the word ‘stoned.’ You just sit there like a stone on weed.”

On Aug. 24, more than two weeks after blindsiding employees and investors with the tweet, Musk decided to keep Tesla a public company.

“Given the feedback I’ve received, it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company,” he wrote in a blog post on the Tesla website.

The sudden resignation of Morton as chief accounting officer could be of interest to securities regulators. The San Francisco office of the Securities and Exchange Commission is investigating not only Musk’s unusual tweet about having “funding secured” to take the car company private, but broader issues surrounding company disclosures about production goals with its latest offering, the Model 3.

Activist short seller Andrew Left sued Tesla on Thursday, claiming Musk manipulated Tesla’s stock price to squeeze shorts and, in the process, hurt all buyers of the company’s shares by issuing false and misleading information. An analysis by S3 shows he has lost about $2 million in both realized and unrealized losses.

Most employees at Tesla, as part of the application process, are required to sign a nondisclosure agreement that some have cited as reasons for not commenting publicly about their tenure at the company.

A copy of that agreement contains a clause regarding communication with government agencies about “Tesla’s confidential information,” that some employment lawyers said may be deemed objectionable. The clause said applicants and employees “must limit the disclosure to the maximum extent permissible.”

Stuart Meissner, an attorney who represents two former Tesla employees who have filed whistleblower complaints against the company with the SEC, said one of his clients raised an objection to the clause in his filed complaint.