Elon Musk has been all over the news lately, the coverage ranging from his unexpected tweet about taking Tesla private to revelations of the chaos in the company's work environment. Consequently, Tesla shares have dipped nearly 10% this past week and 24% over the past month. While this dip is insignificant in the long term prospect of the company, a more concerning aspect is Musk's behavior. Shareholders alike have joined in confused chaos as to the future of Tesla, and rightfully so. Despite the extraordinary vision Musk has for the company, it will not go anywhere if the present leadership style persists.
Legendary investor Steve Eisman, notoriously known for his correct prediction about the housing market crash of 2007, announced in late July he is short on Tesla for "execution problems", citing the exodus of top executives from the company in recent months. This trend was correctly identified well before Musk's twitter storm and reports about Tesla's work life. The fact that the trend of poor management has only worsened over the past month indicates that Musk is not receptive of evidence-based criticism, which is a critical flaw when shareholders are already on the brink of hope for the company.
In terms of management specifics, one former VP describes Musk's leadership style as "intricate and terrible". Similar to Amazon, there are long, arduous hours. However, Bezos has not created a rift between his workers on the magnitude that Musk has created. While some find his work "inspiring", others, like the former VP, find his style to be ineffective and, in a sense, stubborn. This type of rift is never a good thing fundamentally. Regardless of how well a company is doing, workers and management are what gets the concept to market, and if there is a rift in the perspectives between the two, inefficiency and all sorts of chaos arise.
Increasing competition also provides no benefit to Tesla. Mercedes just announced its plans to "aggressively" approach the electric car industry by unveiling plans for a new electric EQC. This plan is projected to be 15-25% of Mercedes' total revenues by 2025.
If you pair Musk's stubborn and inefficient management techniques, as well as his loose behavior regarding something as critical as Tesla's financial future, and increasing competition on both domestic and foreign fronts, Tesla faces a long uphill battle ahead, one which present/interested investors should be heavily concerned about.
My take: Avoid Tesla unless Musk explicitly states changes within the company such as management style or changes in his behavior. For current investors, don't sell unless more troubles in/from the company occur over the coming months (especially if these events persist after earnings).
Reddyfinance and Rishabh Reddy are not liable for any financial losses as a result of this article. This post is strictly an opinion and in no way should be recommended as the sole means of reasoning for investment. Rishabh does not own shares in Tesla, Amazon, or Mercedes.