Things are shaping up to be difficult for Tesla and Elon Musk in the coming weeks and months, but they seem to be sticking together.
Tesla’s board of directors issued a statement backing Musk following the lawsuit filed by the SEC while Wall Street is bracing for the blowback.
The SEC is seeking Musk to be barred from holding the CEO and Chairman roles at Tesla over his tweets about the take-private deal.
Musk was reportedly offered a no-guilt deal by the SEC, but the CEO decided to fight the lawsuit at the last-minute.
At that point, it’s not uncommon for the board to ask the executive to be removed pending the lawsuit, but Tesla’s board instead issued a statement backing Musk:
“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees,”
Now Wall Street is trying to digest the news of the SEC going after Musk.
Tesla’s stock is down 12% before the market opens this morning.
Analysts are weighing in. Barclays analyst Brian Johnson says that Tesla benefits from a $130 ‘Musk premium’, which would go away if the SEC is successful in banning him from holding a position at the company.
Citi quickly issued a ‘sell’ rating and reduced its price target. They wrote in a note to clients:
“There’s little question that Mr. Musk’s departure would likely cause harm to Tesla’s brand, stakeholder confidence and fundraising. If Mr. Musk ends up staying on, the reputational harm from this might still prevent the stock from immediately returning to normal,”
The consensus is that the impact will be felt for a while regardless of the outcome of the lawsuit.
Musk says that he wants to fight the complaint. He said that the facts will show that he never “compromised” his integrity.
I already gave my opinion about the situation in our previous post about this, but here’s a little more about the timing of it.
It happened at a horrible time for investors. Tesla is about to report record production and deliveries and most likely its best financial results in five years.
I can’t help but agree with Citi that this will likely impact the stock regardless of the outcome for Musk.
But Tesla is still delivering vehicles at a record pace. Those record numbers are coming next week no matter what.
It will be an interesting contrast with Musk being sued by the authorities while Tesla releases results for what could very well be its best quarter ever.
What do you think? Let us know in the comment section below.