Nomura Instinet analyst Romit Shah thinks Tesla (NASDAQ:TSLA) CEO Elon Musk is damaging the company’s brand. Shah lowered his rating to “neutral” from “buy,” while also reducing his Tesla stock target price to $300 from $400, suggesting in a note to clients that TSLA stock is “no longer investable.”
This was coming from arguably one of Wall Street’s most bullish analysts.
“The issue though is the erratic behavior of CEO Elon Musk. During the second quarter, the switch seemingly flipped. … We are worried that this behavior is tainting the Tesla brand, which in terms of value is most important,” Shah wrote in his note to clients Sept. 11. “Notwithstanding improving fundamentals, we believe that Tesla is in need of better leadership (an about face) and are moving to the sidelines until we see what happens with management.”
Musk: A Funny Version of Trump
One of the problems Shah cites when discussing Musk’s impulsive behavior is the CEO’s proclivity for tweeting: He’s averaged 15 tweets a day over the last four months; he averaged four times a day in the previous 18 months.
By comparison, President Trump averaged seven tweets a day in his first year in office. At the end of May it was suggested that since Trump started tweeting in May 2009, he’s averaged about 11 or 12 a day, which indicates DJT slowed down his rants once in the Oval Office.
Musk seems to have gone in a reverse direction from Trump, actually ramping up the number of times he tweets, lending credence to the suggestion he’s become unhinged.
However, the upside of Musk’s erratic behavior has been his wicked sense of humor. I don’t think there’s ever been a funnier CEO of a public company.
Mental health assessments aside, the guy does know how to laugh at himself and the world around him.
“I’m actually wondering about putting in a roller coaster — like a functional roller coaster at the factory in Fremont,” Musk once stated. “You’d get in, and it would take you around [the] factory but also up and down. Who else has a roller coaster?”
It’s hard to argue with that kind of logic.
But seriously, what’s wrong with blowing off a little stress by laughing once in a while?
A New CEO
CNBCs Jim Cramer thinks a medical leave is the answer to Musk’s behavior.
“I’m worried about the guy,” Cramer said Sept. 11 on Squawk on the Street. “Medical leave is fine. I think the board puts him on medical leave. That’s not a sin. It could be a good thing.”
Darn straight. The man needs some time off to give his brain a rest.
And while he’s off, perhaps the board ought to take the opportunity to reach out to some potential CEO candidates, so that, when he’s ready to come back, they’ve got a slew of people to interview.
Musk moving out of the chief executive’s role into a bigger-picture type of position, such as executive chairman, makes perfect sense.
It might seem odd for Tesla to be run by anybody other than Musk, but given it’s at a very critical point in the company’s history, it’s worth finding out.
As Cramer suggests, “a healthy Elon Musk is something that can take the stock higher.”
Is Tesla Stock No Longer Investable?
I wouldn’t say it’s gotten to that point just yet.
But as every day passes and investors wonder which Elon Musk will show up to work, it becomes increasingly clear that the board’s fiduciary duty to act in the best interest of all shareholders including its largest — Musk owns 22% of Tesla’s stock —– requires that it act sooner rather than later. Otherwise, the lawsuits are going to come faster than the Tesla assembly line.
It might make sense to rework Musk’s 10-year compensation plan — March 2018 seems so long ago — so that it’s financially worthwhile for him to step aside.
Tesla stock depends on it.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.