The Big Red Car is a fan of Tesla, the idea of a new kind of electric car is exciting. It has been a “thing” for a decade. The BRC is, however, skeptical of the leadership of Tesla, specifically Elon Musk.
Is it possible to be a fan of a product and a skeptic of a company? Concerned about the stability of a CEO? Apparently.
Several odd things have caught my Big Red eye.
Tesla CEO instability
Elon Musk is a genius. With genius comes ….. well, you get the idea. The guy is mercurial and volatile. It shows up in his personal life and his business life.
There are a few recent episodes which give one pause.
1. The first was the Tweet disaster of his saying he was considering taking Tesla private. This, of course, attracted a lot of attention. Musk indicated the going private transaction would likely be priced at $420/share and that he had secured funding at that level. Turned out, in fact, he had not.
The result was some unwanted attention from the United States Securities and Exchange Commission which frowns on CEOs screwing up markets with idle gossip and misleading shareholders – the part about “funding secured” which turned out to be untrue. Already, there are lawsuits and an invitation to chat with the SEC. This is going to be costly before it’s over.
The SEC likes significant events and changes in control to be signaled by the filing of US SEC Forms 8K and 13D. There are rules about such things.
2. The second thing which caught my eye was this podcast interview with Joe Rogan. Not the content of the interview, but the whiskey drinking and pot smoking. Let me be the first to say they are both perfectly legal, but are they prudent?
You be the judge of that, please.
During the interview, Musk let slip that it is a hard proposition to run a modern car company.
Does the investing public want a CEO who makes rash utterances and drinks whiskey and smokes pot during interviews?
For years now, everybody has known that the competition is coming with their own electric cars. No mystery here. In the wings are Jaguar, Nissan, Hyundai, Audi, Kia, Mercedes — those are companies which will launch products within the next year.
Mercedes showed their first entrant into the EV business this week. This is real.
Companies like Mercedes, Volvo, BMW, Volkswagen are all coming for Tesla. This is some fierce competition. These companies have no difficulty making cars while Tesla is struggling to make cars. These companies have deep pockets, are battle hardened, have an existing dealer and maintenance network, and a database full of customers. The future holds competitive models like this:
What also caught my eye was the odd resignation of Tesla’s brand new head of accounting. He quit after thirty days on the job. David Morton had this to say, ““The level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations. As a result, this caused me to reconsider my future.” Huh? Did you do no due diligence on the job?
The Securities and Exchange Commission is always sensitive about changes in financial personnel and therefore requires such a person to attest to the fact they are not leaving because of financial irregularities. Morton offered that assurance.
Still, guy leaves in thirty days? Seems odd to a Big Red Car.
That’s not all. Now, it turns out the head of Human Relations (Chief People Officer, don’t you love it), out on maternity leave, is not returning. Two resignations on the same day.
Bottom line it, Big Red Car
So, dear reader, here it is – Tesla feels like a leaky boat. An enterprise which is not quite right and whose CEO is exhibiting behavior which is mercurial and volatile. It shows up in their stock price over the last three months. Take a look at this graph.
High of $379.57/share on 8-7-2018 and a current price of $280.95/share. That’s a bit of a $100 haircut, no? The stock market seems to be seeing the same thing and pricing it into the stock.