Tesla shaken by a departure and what Musk was smoking
For a moment, it looked as if Elon Musk and Tesla had put a summer of turbulence behind them. The moment was very brief.
Two weeks after the collapse of a plan to buy out the company’s public shareholders, the electric-car maker has again been plunged into turmoil. Its chief accounting officer suddenly resigned — after a month on the job — and Musk, its chief executive, appeared on a late-night webcast taking a deep drag on what his interviewer said was a marijuana cigarette.
The developments, which brought new scrutiny of Musk’s behavior and managerial fitness, rattled investors who have lately endured many challenges to their faith. Tesla shares ended the day off 6 percent and are at their lowest level since April. But while the decline was sharp, it was not sudden.
In the month since Musk abruptly announced on Twitter that he had “funding secured” to take the company private, the shares have lost almost a third of their value. And a distinction that Tesla first achieved last year — the American automaker with the highest market value — has been ceded back to General Motors.
But even the notion of a marijuana-smoking chief executive seemed less disturbing to Tesla watchers than the departure of Dave Morton, the accounting chief, whose immediate resignation was reported Friday in a securities filing. His first day of work was Aug. 6, one day before Musk’s Twitter pronouncement about going private, an initiative that surprised even Tesla’s board. And by Morton’s own account, the Tesla culture quickly proved to be a bad fit.
“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.”
He went on to say, “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.”
After the company dropped its pursuit of a stock buyout, it seemed ready to focus on its goals: production of the crucial Model 3 sedan and a push to deliver profits. But analysts said the sudden exit of Morton — the latest in a growing exodus of top Tesla executives — prompted new questions about the company.
“Losing a chief accounting officer so quickly at a time when the company’s finances are under pressure does not give good optics,” said Mike Ramsey, an automotive analyst at Gartner. “It gives the implication that the executive was uncomfortable with the situation or with putting his name on something.”
There is no question that Tesla’s culture is different from that of conventional automakers or even other Silicon Valley companies — like data storage company Seagate, Morton’s last employer. That is largely by Musk’s design, and certainly reflects his outsize presence. His web appearance late Thursday was the latest evidence.
He was the guest of comedian Joe Rogan, an advocate for legalizing marijuana, and 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 he 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?” He then proceeded to take a puff. Marijuana is legal for medical and recreational use in California, where the interview was recorded.
After Musk announced on Aug. 7 that he intended to take Tesla private at $420 a share, there was speculation that the figure was chosen because “420” is a code for marijuana in the drug subculture.
In an interview with The New York Times while the gambit was still in play, Musk didn’t deny a connection. But he did try to clarify his state of mind in hatching the plan — and the shortcomings of mind-altering.
“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.”
Even though the plan to go private has been set aside, its repercussions continue. The San Francisco office of the Securities and Exchange Commission is investigating Musk’s tweet about having “funding secured” — a proposition that proved dubious — as well as broader issues surrounding company disclosures about production goals with the midsize Model 3, which Tesla is counting on to drive up revenue and stabilize its finances. Shareholder lawsuits are also cropping up.
After declaring aggressive output goals for the new model, Tesla has struggled for the last 12 months to smooth out glitches and bottlenecks in its assembly process. Musk has vowed that Tesla will report profits in both the third and fourth quarters, a forecast based on production of 5,000 Model 3 sedans a week.
Tesla reached that level in late June, but did so by working around the clock and hastily adding a third assembly line in a gigantic tent outside its factory in Fremont, California — a measure that auto-manufacturing experts had never seen before.
Analysts think the company has been averaging close to 4,000 cars a week or fewer since then.
And investors have remained on edge as the stock declines — it closed Friday at $263.24 — and Musk continues to draw attention away from strategic priorities, often through impulsive outbursts on Twitter.
“It’s time for Tesla and Elon Musk to grow up,” said Michelle Krebs, executive analyst at Autotrader. “The company has problems, and it seems the board and investors need to start speaking up about how the company is being run. Maybe behaving like that is cool to some people, but doing it while running the company with other people’s money is really not cool.”
A company spokesman, Dave Arnold, had no comment.
There has been periodic talk of installing a No. 2 under Musk or a chief operating officer, as is the case at SpaceX, his private rocket company. While there is no sign of such a move, Tesla released a long list of executive appointments late Friday, including that of Jerome Guillen, an eight-year Tesla veteran with experience at the German automaker Daimler, to oversee all automotive operations.
Musk has made Tesla’s brand inseparable from his own image. He is not only chief executive of the 15-year-old company but also its chairman and largest shareholder. Now that Tesla is remaining a public company, it will be up to its board to determine if and how his role might change.
If he is feeling any insecurity, it was not reflected in his webcast with Rogan. He appeared at ease, sipping whiskey, and spoke, at one point, about artificial intelligence and how it could not be controlled.
“You kind of have to be optimistic about the future,” Musk said. “There’s no point in being pessimistic. I’d rather be optimistic and wrong than pessimistic and right.”