This analysis was first published in SvD Näringsliv, in Swedish, on December 15th, 2022.
Tesla is the EV market leader, but faces tough competition ahead. The bigger storm cloud, though, is coming from inside: the CEO is selling shares and pouring his energy into Twitter.
Have you heard of Marc Tarpenning and Martin Eberhard?
The most devoted enthusiasts will know the names, but for most people, they are two figures who disappeared without leaving a visible mark on the world. They are, in fact, the founders of Tesla. Eberhard also served as CEO during the company’s first four years.
But the name associated with the company is Elon Musk — the man who always seems to be at the centre of things.
As a colourful — and controversial — figure, it is hard to separate him from the companies he becomes involved with. That Tesla has benefited from this fascination is obvious. But now the other side of that coin is starting to show.
This week, Musk sold 22 million Tesla shares for $3.6 billion, roughly 37 billion kronor. He remains the largest shareholder, but the timing of the sale raises questions. Tesla’s stock has fallen around 55 percent since the start of the year and is now at its lowest point since autumn 2020. When a company’s CEO — an insider — sells shares, it is always noteworthy. And it invites scrutiny.
Part of the explanation comes down to Twitter. Following Musk’s $44 billion acquisition of the platform earlier this year, he made two large share sales. The first was in April, for around $8.5 billion, and then again in August for $3.95 billion. Both were necessary to finance the deal — a deal he spent months trying to walk away from.
On both occasions, Musk stated he did not intend to sell further Tesla shares. This week’s transaction was therefore not something other shareholders were expecting. That an acquisition of this scale requires cash is something most people can understand. What is harder to see is how Tesla’s shareholders benefit from any of this.
Beyond the share sales, there is a growing concern about where Musk’s time and attention actually go.
KoGuan Leo, the third-largest individual Tesla shareholder, put it plainly: “Elon has abandoned Tesla and Tesla has no functioning CEO. Tesla needs and deserves a full-time CEO.”
More shareholder voices are now being raised. They see a company that needs complete focus to navigate an increasingly competitive electric vehicle market, where Chinese rivals are gaining ground fast. Having a CEO spread across so many other companies is a liability. Twitter and Tesla have nothing in common beyond their owner — but the associations bleed across regardless.
The question this raises is what Tesla’s board should do. Musk is certainly a major shareholder, but not the only one. The board’s primary responsibility — in any company — is to represent all shareholders and ensure the right person is in charge. That is a difficult task under ordinary circumstances. It is particularly difficult when the CEO’s brother, Kimbal Musk, is one of the board members.
Removing Musk is not going to happen any time soon. But even prominent CEOs get pushed out from time to time. One need only look at Twitter itself, where Jack Dorsey stepped down just over a year ago. He was then running both Twitter and the payments company Block (formerly Square). The loudest voices calling for his departure were activist fund Elliott Management, who believed the company needed new leadership and faster product development. Back then, the argument was simple: you cannot have a CEO with two jobs.
Elon Musk has considerably more than two. On the other hand, he also appears to work extraordinarily hard, and has an army of loyal allies around him. Neither Tesla, SpaceX nor Neuralink need him present every day for the companies to continue developing.
The success Musk has delivered has earned him enormous goodwill. That goes a long way. But after a share price fall of more than half, there is a real risk that patience eventually runs out — even for Elon Musk.
