Why Tesla does not want to get rid of Elon Musk

Elon Musk, CEO and President of Tesla, has launched federal polls in recent months tweet to take his private company. He was pursued by a British cave diver for insisting that this man was a pedophile. He appeared to be smoking marijuana on a podcast with the media and talked about his use of Ambien to sleep.

If another person at the head of a multi-billion dollar public company does so, the board of directors of the company could suffer the consequences. be removed completely. But because he's Elon Musk, and it's Tesla, that's not what happened.

The "cult of Elon Musk" and the belief of many fans of the contractor that he is a genius capable of running Tesla alone have allowed him to keep control of the electric car company. Many investors are in Tesla because they believe in Musk, and if he had to withdraw, it's hard to know what could happen to his course.

And even if the shareholders wanted Musk to leave, his board of directors might not have the ability or willingness to act. The Tesla board of directors is filled with many Musk allies, including his own brother, and he has remained faithful to him until now. A shareholder vote to remove him from office failed earlier this year, and the complex configuration of Tesla gives Musk an unconventional control of the company.

"The problem is that he basically controls the company with his position. The board of directors is basically appointed by him, and it is very difficult for a director to cross the person who puts you there, "said Charles Elson, director of the Weinberg Center for Corporate Governance. University of Delaware. "That being said, they have greater responsibility, and the burden is no longer on him but on them."

Tesla and Musk inspire a lot of feelings on both sides

Tesla, perhaps more than any other company, arouses strong reactions from those who like the company and those who oppose it. There are Tesla fans who seem determined to stay loyal to the company and Musk, no matter what happens, and to Tesla's critics, who think it's only a matter of time before the automaker failed. The latter group is also where you get the Tesla shorts – the short sellers who are essentially betting against Tesla and the price of his action will fall.

Musk often fights publicly with short sellers, and the August: privatization tweet seems to have been partly motivated by the executive's desire to come back on them. (It did not work.)

At the same time, he seems well aware of the importance of his superfans. When he published an article explaining his thoughts on taking Tesla privately in August, he estimated that two-thirds of Tesla's current investors believed in the company. would be transferred to a private Tesla instead of taking the $ 420 buyback per share, well above the Tesla stock price of about $ 350 at the time. (Tesla's stock closed Friday at $ 299.10.)

As Stephen Bijan explained to the Verge, for some, "the act of buying a Tesla is an investment in the future of the world". This feeling of enthusiasm, to which he adds attention to Musk, could be enough to keep Tesla musk in need of further examination. And even when the Tesla fans question the actions of the billionaire born in South Africa, some of them rather accuse Musk's interests of his problems.

Garrett Nelson, senior equity analyst at CFRA Research, said it was "impossible" to quantify the value of Musk's persistence as Tesla's CEO and chairman in his stock market.

"I would say there is an Elon Musk bonus in the stock," he said. "However, as it is doing more and more erratic things, I think more and more players are changing their attitudes, from a strategic point of view, to know what makes sense for society and its role. . "

Even if the shareholders wanted to leave Musk, doing it might not be so easy

Beyond the behavior of Musk, Tesla has many problems to solve: the chief accountant of the company resigned at the beginning of September, after less than a month of work; it improves but still cuts with the production objectives of model 3; By the end of June, the country had $ 10 billion in debt and only $ 2.2 billion in cash. (Tesla says she expects the money to increase.)

This, compounded by Musk's problems, pushed Tesla's board to be more vigilant.

There are currently nine members of the Tesla Board, including Kimbal Musk, 21.^st James Murdoch, CEO of Century Fox, and Antonio Gracias, former director of Tesla Investor and Valor Management, which a group of shareholders tried to get rid of the board this year, arguing that they could not control Musk and citing Musk's refusal to answer analysts' questions about an appeal regarding Tesla's results. Another shareholder also tabled a resolution asking Tesla to divide the president and CEO positions, leaving Musk to stay in the forefront.

Both resolutions were widely supported by the consulting firm Institutional Shareholder Services. (He advised to keep Kimbal Musk). Both failed.

"No other CEO, given what happened, would probably have survived this situation," said Elson, an expert in corporate governance. "The fact that he suggested a council that is very faithful to him."

The New York Times reported in September that Musk's Take-Tesla-Private tweet had angered some board members and some board members had expressed concerns about his workload and the use of Ambien. But so far, all of the council's concerns have largely remained rumors.

A spokesman for Tesla declined to answer questions about the council's trust in Musk and why he had not reacted to the founder's nonsense in recent months.

But it's not just the loyalty of Tesla's board that has ensured Musk's security – it's also the way the company is structured. Musk owns about 22 percent of Tesla's shares and, as Ron's latest addition to TheStreet's Ron Orol put it, combined with Tesla's overwhelming voting rules, gives him a lot of control over Tesla. The builder's voting requirements require that two-thirds of the shares approve major changes, including merger and acquisition transactions and adjustments to its board.

"The main reason why [Musk] seems to be treated differently because it is a large shareholder, "said Nelson, from CFRA.

Gene Munster, Tesla Bull and managing partner of venture capital firm Wolf Ventures, is supporting Musk to stay at Tesla, telling me that he believes the South African-born entrepreneur "brings something new to the market. That no one else can bring "critical to the success of the company. He compared it to Jeff Bezos at Amazon and Mark Zuckerberg at Facebook.

But even he acknowledged that Musk "does not need to be chairman of the board," even though the board and shareholders can not do much. "A more likely route is that Elon does what is best for Tesla, and the best thing for Tesla is to stay on the board but give up as president," said Munster.

Until now, this does not happen.

That's sort of how Tesla and Musk are

Musk is one of the most prominent players in the US corporate sector, and the buzz and enthusiasm of Tesla has made it one of the largest automakers in the United States. Earlier this month, while Musk appeared to be smoking marijuana on comedian Joe Rogan's podcast, Google's research on him surpassed that of Donald Trump and Kim Kardashian.

Google trends

He is not the first charismatic founder and leader to trigger problems within the society he has created. Steve Jobs was launched by Apple in 1985, to return later. Facebook appealed to Sheryl Sandberg on Facebook, in part, to provide Zuckerberg with a strike force and a second-in-command.

It has been argued that Tesla brings a Sandberg character to support Musk, which, according to Nelson, would be a good idea. "It's a business that still does not have a chief operating officer, and that's where they all have their problems," he said. "It's clear that the demand is there, it's only about executing."

The clock is turning. Tesla's stock price has dropped about 20% since August 7, the day Musk tweeted he was considering taking Tesla privately and sending Tesla shares. Debt, liquidity and profitability issues persist (although the company expects its liquidity problems to improve rapidly), and now the Justice and the Securities and Exchange Commission polls must now be settled.

"[Musk is] clearly a genius. I would compare it to the Thomas Edison of our time, "said Nelson. "Having said that, he's very distracted at a time when he really needs to focus on the operational execution and on the achievement of the model 3 goals. Instead, he appears on podcasts, tweeted, he spends a lot of of time on SpaceX while it is likely that they are probably at the most critical time of the company in terms of operational execution. "

Munster was slightly more optimistic, although he acknowledged that the scenario would probably not change.

"Society has always operated in a form of organized chaos," he said. "It's not an optimal structure, but they have succeeded in this context."