Tesla without Musk? SEC suit raises unthinkable prospect

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Elon Musk, on the right, with Toyota President Akio Toyoda, left, who was offered the keys to a Tesla Roadster in November 2010, six months after the two companies formed a partnership. Photo credit: REUTERS

It is almost impossible to Tesla Inc. to be presented without Elon Musk – his chairman, CEO, largest shareholder and public face.

But the lawsuit of the Securities and Exchange Commission Thursday raised questions about the future of the executive at the clean energy company, causing the shares to gain momentum. The office accuses Musk, 47, of misleading investors with his notorious August 7 tweet about Tesla's private taking and tries to ban him from serving as a director or officer.

That possibility, no matter how far away, casts a glance at the last days of a rocky neighborhood and will probably worry about Tesla's lack of an operational chief or a clear number 2 extension. This weekend was to be a festive milestone, with thousands of Model 3 sedans finally making their way to customers at delivery centers across the country as the company took a final step towards sustainable profit. But again the drama around Musk is central.

"If Elon Musk deducts or is not the CEO, Tesla is a fundamentally different company that is less attractive to us," said Ross Gerber, CEO of Gerber Kawasaki in Santa Monica, California, which owns Tesla shares.

The shares plummeted 12 percent during the Thursday afternoon trade. Apart from the drama around Musk's tweet, Tesla says he can go private – and his decision less than three weeks later to stay public – the company has struggled with the departure of several top executives, most recently Liam O'Connor, vice president of global supply chain management and Justin McAnear, vice president for global finance. The Ministry of Justice has also opened a fraud investigation.

Tesla and his board of directors "have every confidence in Elon, his integrity and his leadership in the company," they said in a joint statement Thursday. "Our focus remains on the continued delivery of Model 3 production and delivery for our customers, shareholders and employees."

Big sales

Tesla has recently emerged from months of what Musk & # 39; production-hell & # 39; called to & # 39; delivery logistics hell & # 39 ;. The company is in a race to deliver its major Model 3 vehicles to customers by the end of the third quarter, which is likely to lead to "huge" sales figures, just as some investors flee the SEC pack, Gerber said.

"Tesla is going to blow sales figures out of the water, but the stress and meltdowns of Elon in recent months have had a real impact on the company," he said.

Musk was unusually quiet on Twitter on Thursday, but said in an e-mail statement that "this unjustified action from the SEC makes me deeply sad and disappointed." The board of Tesla, of which Musk & # 39; s brother Kimbal Musk is a member, is generally regarded by experts in the field of corporate governance as being closely aligned with the CEO. The company itself was not focused in the process.

"This was clearly a self-inflicted wound and it comes at a time that is crucial for Tesla, which needs no further challenges," said Michelle Krebs, senior analyst at AutoTrader researcher. "They are under financial pressure to change things and to face an attack from new competitors."

& # 39; Visionary & # 39; role

In the spring, the shareholders rejected a proposal to split Musk's role as chairman and CEO and grant him an unprecedented compensation package that paves the way for him to stay in the company.

"There is a 50-50 chance that Musk will be removed as CEO, but there is a 95 percent chance that he will stay with the company," said Gene Munster of Loup Ventures. "I think the SEC process scared people, which can give the board the backbone to put Musk in a visionary role." Shareholders want him to remain as a visionary. "

Tesla makes the Model S sedan, Model X SUV and the Model 3 at its lone car factory in Fremont, California. The company has enormous ambitions to not only disrupt the car industry, but also the energy markets by selling large batteries to utilities. Musk has a laundry list with large, capital-intensive projects on its task list: a factory in China, a semi-truck, a Model Y-crossover vehicle, self-propelled technology and a sunroof product that is still under development.

Tesla's lofty market value – $ 52 billion at the end of Thursday – depends on the expectation that Musk will fulfill those goals, said Maryann Keller, an independent car industry consultant who was once on the former board of the Dollar Thrifty Automotive Group sat.

Tesla also has more than $ 10 billion in debt, but only $ 2.2 billion in cash on the balance sheet from the end of the second quarter. Musk has traditionally had few problems with raising money on Wall Street.

"Without Elon, Tesla would be a debt-laden car manufacturer who burns a lot of money," said David Whiston, an analyst at Morningstar Inc. in Chicago.

"There is a lot of risk for the shares because the story of Tesla is all about keeping access to the capital markets," he said. "Do you, as a potential investor, really want to invest in this company without Elon Musk? Personally, I think it would be very dangerous to do this."