Is it time for Tesla CEO to leave?
Musk under more scrutiny after interview
Tesla investors have, for years, obsessed over CEO Elon Musk’s every tweet, public utterance and printed quote, sifting them for clues about the electric automaker’s finances and plans.
On Friday, he gave them plenty. And Tesla’s stock tanked in response.
In a lengthy interview with the New York Times, Musk frequently grew emotional, admitted sometimes needing Ambien to sleep, tried to explain a possibly misleading tweet about taking Tesla private, complained of the job’s physical and emotional toll and said that anyone who could do a better job running Tesla “can have the reins right now.”
Such comments would have seemed remarkable coming from any CEO of a company worth more than $50 billion. For Musk, they capped months of what many observers consider to be self-inflicted wounds. Tesla stock plunged nearly 9 percent Friday to close at $305.50.
As Tesla struggled to ramp up production of its make-orbreak Model 3 sedan this year, Musk at turns has insulted financial analysts for asking “boring, bonehead questions,” scolded reporters for questioning the safety of the company’s Autopilot self-steering feature and suggested that a diver involved in the Thailand cave rescue was a pedophile.
And in a move now reportedly being scrutinized by federal regulators, he announced last week that he was considering taking the company private, releasing the news in a tweet so short and seemingly off-the-cuff that many people mistook it for a joke.
“I think they actually need a
first-in-command who is not Musk, and I say that seriously,” said Erik Gordon, a corporate governance expert at the University of Michigan’s Ross School of Business. “He wants to say flippant things that are potentially damaging to the company, and he doesn’t learn. He’s smart enough to learn anything but arrogant enough not to learn anything.”
Musk’s comments placed Tesla’s board of directors in a difficult position, several analysts said.
The directors were reportedly stunned by his proposal to go private, and they have scrambled to react, issuing press releases detailing how they plan to evaluate the idea. After Friday’s interview, several analysts said, the directors may face pressure to rein in their headstrong celebrity CEO with his vast fan following, hire another executive who can ease the load of running Tesla, or both.
“Maybe he needs a co-chair, a co-CEO to help him get through this, who actually has experience in the automotive sector, unlike himself,” said Bill Selesky, senior analyst with Argus Research.
Not everyone is convinced, however, that Tesla’s board will stand up to Musk, who serves as its chairman. Several directors — including Musk’s brother, Kimbal — have long-standing ties to the entrepreneur.
“I don’t think the investment community sees them as being very independent from Mr. Musk,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. He suggested splitting Tesla’s CEO and chairman positions, or designating a lead director to speak for the board.
“There are a lot of things they can do,” Elson said. “I’m not sure they’re going to do them.”
Although Musk helped found the company and was its first significant investor, he was not its first CEO, nor its second or third. But since its original luxury electric car, the limited-edition Roadster, seized the public’s attention a decade ago, Musk has become inextricably tied to the company’s image and brand. With more than 22 million followers on Twitter, he has become the company’s visionary and voice, as well as a forceful evangelist for electric vehicles and renewable power.
“When people are investing in Tesla, they’re mostly investing in Elon Musk,” said Efraim Levy, senior equity analyst at the CFRA research firm. “Is there a car company and a brand that could go on without him? Yes. But it would be greatly diminished.”
The Securities and Exchange Commission has reportedly questioned Tesla about Musk’s assertion, in his initial tweet about possibly going private, that he had already secured funding for the deal. In a blog post released nearly a week later, Musk explained that Saudi Arabia’s sovereign wealth fund had suggested the deal and expressed interest in backing it. The same post, however, made clear that the fund would need to scrutinize the financial terms of any deal before approving it.
In his Friday New York Times interview, Musk said he tweeted his initial comment on going private en route to the airport and did not show it to anyone else in advance.
The Times, citing unnamed sources, also said that Tesla’s board is indeed searching for a second-in-command to help Musk run the automaker, which he leads in addition to his SpaceX rocket company and his tunneling-equipment startup, the Boring Co. But Musk has developed a reputation as a difficult boss to please.
“Are they going to be able to find someone to take that position?” Elson said. “Would you want to be second banana to this CEO?”
Despite Friday’s interview, several financial analysts said their opinion of Tesla’s performance as a business hasn’t changed. Selesky, for example, said the company finally appears to be working out the kinks in the Model 3 production process and may have turned a corner on years of losses. Musk has insisted that Tesla will become profitable on a sustainable basis in the second half of this year.
“It’s not going to be a straight line all the way up,” Selesky said. “As long as they can get their production problems fixed, they have a product American consumers want.”