Tesla declines as Wall Street questions Musk’s about-face

Tesla shares slid on Monday as investors questioned whether the company needs to beef up its top leadership after Elon Musk ditched an earlier plan to take the company private. 

In a blog post Friday, the billionaire entrepreneur declared “most of Tesla’s existing shareholders believe we are better of as a public company.” Going private, Musk added, “would be even more time-consuming and distracting than initially anticipated.” The Tesla board issued its own statement, saying members “fully support Elon as he continues to lead the company going forward.”

Shares of Tesla declined 3 percent on Monday as investors pondered Musk’s about-face, as well as the regulatory probe his go-private proposal inspired. Some analysts said the drama has damaged the credibility of both Musk and his board, and called for the company to bring in a top operations executive to help right the ship. 

“The key question is whether investors will continue to support a CEO who may potentially be involved in market manipulation and/or securities fraud as well as a company under SEC investigation,” noted Cowen analysts, who believe the Tesla board should hire “a more operational CEO or at a minimum a COO with high volume automative experience.”

Tesla said it’s not actively searching for a chief operating officer. “While we are always looking for highly talented executives at Tesla, there is no active COO search,” a Tesla spokesperson said in an email.

Other analysts offered a more positive view, saying any eventual regulatory fine would be immaterial and that Tesla will now be able to focus on making electric vehicles.

The decision to scrap plans to go private “removes a large distraction that had significant chance of failure and the potential to severely limit Tesla’s access to capital while attempting to execute on its ambitious product strategy,” Oppenheimer analysts wrote Monday in a research note. 

“We would not be surprised to see an incremental hire of a senior operationally focused executive,” they added, while dismissing speculation that Tesla would look to replace Musk as CEO. 

Ben Kallo, an analyst at Robert W. Baird, believes much of the current drama regarding Tesla is noise that will dissipate at the company producing the “best selling sedan out there that is starting to generate a profit.” 

As for Musk, Kallo is not counting him out: “He’s had several lives, an ability to do things other CEOs couldn’t with investors’ support.”

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