Fears for Musk’s future sink Tesla shares
REGULATOR SAYS CEO WAS MISLEADING, SEEKS TO EXCLUDE HIM FROM MANAGEMENT
US regulator says tweets of largest shareholder and public face of company were false and misleading, seeks to exclude him |
It is nearly impossible to imagine Tesla Inc. without Elon Musk, its chairman, CEO, largest shareholder and public face. But a US Securities and Exchange Commission (SEC) lawsuit has raised questions about his future at the clean-energy company, sending shares spiralling. The agency accuses Musk, 47, of misleading investors with his infamous August 7 tweet about taking Tesla private, and seeks to ban him from serving as a director or officer.
The shares slumped as much as 13 per cent to $268.10 (Dh985) yesterday, the biggest intraday drop in more than three years.
That possibility, however remote, casts a pall on the final days of a rocky quarter and is likely to renew concerns about Tesla’s lack of an operating chief or other clear number 2.
This weekend was supposed to be one for celebratory milestones, with thousands of Model 3 sedans finally making their way to customers at delivery centres across the country as the company makes a final push to achieve sustainable profits. Instead, drama surrounding Musk is once again taking centre stage.
“If Elon Musk resigns or is not the CEO, Tesla is a fundamentally different company that is less attractive to us,” said Ross Gerber, chief executive officer of Gerber Kawasaki in Santa Monica, California, which holds Tesla stock.
Aside from the drama surrounding Musk’s tweet saying Tesla may go private — and his decision less than three weeks later to stay public — the company has been grappling with the departure of several top executives, most recently its vice presidents of global supply chain management and worldwide finance. The US Justice Department has also opened a fraud investigation.
Tesla and its board “are fully confident in Elon, his integrity, and his leadership of the company,” directors said in a joint statement on Thursday. “Our focus remains on Model 3 production and delivering.”
There’s a 50-50 chance Musk gets removed as CEO but there’s a 95 per cent chance that he stays at the company. This may give the board the backbone to put Musk in a visionary role.”
Gene Munster | Managing partner, Loup Ventures
Big sales
Tesla has recently emerged from months of what Musk called “production hell” and now finds itself in what he’s said is “delivery logistics hell.” The company is in a race to get its key Model 3 vehicles to customers by the end of the third quarter, which will likely lead to “huge” sales figures just as some investors flee with the SEC suit, Gerber said.
“Tesla is going to blow sales numbers out of the water, but Elon’s stress and meltdowns in past months have had a real impact on the company,” he said.
Musk was uncharacteristically silent on Twitter on Thursday, but said in an emailed statement that “this unjustified action by the SEC leaves me deeply saddened and disappointed.”
Tesla’s board, which includes Musk’s brother Kimbal, is closely aligned with the CEO. The company itself wasn’t targeted in the lawsuit.
Earlier this year, shareholders rejected a proposal to split Musk’s role as chairman and CEO and awarded him an unprecedented compensation package. “There’s a 50-50 chance Musk gets removed as CEO but a 95 per cent chance he stays at the company,” said Gene Munster of Loup Ventures. “The SEC lawsuit has scared people. This may give the board the backbone to put Musk in a visionary role. Shareholders want him to stay on as the visionary.”
Lofty valuation
Tesla’s lofty market valuation — $52 billion at close on Thursday — hinges on the expectation Musk will deliver on his big, capital-intensive projects, said Maryann Keller, an independent auto industry consultant. “Without Elon, Tesla would be a debt-laden automaker burning a ton of cash,” said David Whiston, analyst, Morningstar Inc.