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Companies may have unconventional CEOs, but not eccentric accounting.
Tesla, the maker of electric cars, revealed Friday that his chief accountant had resigned and was leaving just weeks after his arrival. The announcement was made a few hours after Elon Musk, CEO of Tesla, appeared live on YouTube smoking what appeared to be a marijuana cigarette.
These titles only aggravated the troubles surrounding Tesla this year. Last month, Mr. Musk began and ultimately aborted an ill-conceived attempt to remove Tesla from the public stock market. For a good part of the year 2018, the company struggled to achieve the production targets of Model 3, the low-cost car whose sales are expected to ultimately make Tesla profitable.
The departure of Tesla's chief account officer, David Morton, could be of particular concern to investors because of his unfortunate schedule. Tesla, which has seen its stock of liquid assets shrink in recent quarters as its debt has risen, is entering a crucial period during which there can be no scruples about its financial statements.
Many trips on Tesla achieve certain financial goals. Musk said last month that he expects the company to be profitable in accordance with generally accepted accounting principles in the last two quarters of this year. In less precise terms, Tesla also indicated that it expected positive cash flow. Its leaders have also made predictions about the gross profit of the car, which measures the amount of revenue after subtracting the costs closely related to the production of cars. Since these financial benchmarks are derived from inputs that investors often can not see, Tesla must have confidence.
But with the sudden exit of Morton, investors could now be concerned about the reliability of Tesla's financial statements. Tesla stock fell on Friday and is now trading at 30% below the price it had reached after Musk said in a tweet on Aug. 7 that he was considering taking the company privately.
Mr. Morton could not be reached for comment.
It is possible that his resignation means little. Mr. Morton was not the best accountant of Tesla; it's Deepak Ahuja, the chief financial officer, who has been to the company for a good part of the decade. And at Tesla's Friday filing, Morton said he had "no disagreement" with the company's financial reports. "Since joining Tesla on August 6, the level of public attention for the company, as well as the pace within the company, have exceeded my expectations," said M Morton.
Big questions remain, however, and his statement is unlikely to appease investors.
Mr. Morton was previously Chief Financial Officer at Seagate, a company that manufactures computer disk drives. In announcing his appointment, Tesla said he would "bring Tesla more than two decades of financial and accounting expertise." Did he discover that his new work environment was difficult or out of order? Was there anything that was uncomfortable signing?
Morton's predecessor, Eric Branderiz, left after 14 months.
There is a recent reason why Tesla's high-level accountants might feel uncomfortable. The Securities and Exchange Commission is investigating not only Musk's tweets about the privatization of Tesla, but also the company's disclosures about certain production targets. These surveys can expand.
Before Mr Musk tweeted his intention to go private last month, Tesla's promises to become profitable seemed to reassure investors. Stocks jumped nearly 16% the next day. But the turbulence since then has only increased the pressure on Tesla. Not only must the company keep its promises, but investors must be able to trust these results.
With the last departure from the executive, it has become all the more difficult.
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