Ross Gerber, a major and vocal Tesla investor, says Elon Musk broke the Tesla stock when he sold it to buy Twitter.
Gerber runs the Gerber Kawasaki ETF, and it had its January shareholder meeting yesterday.
The investor had to explain why the fund was down 32% over the last year, and, unsurprisingly, he blamed it on the performance of Tesla’s stock, which the fund is heavily investing in.
But more specifically, Gerber blamed it on Elon Musk and the way he sold Tesla stocks to finance his acquisition of Twitter:
Elon dumped $40 billion of Tesla stocks last year – causing a massive decline in Tesla stock price.
Musk has never directly acknowledged the impact of his selling and actually denied it being a significant factor. He told Gerber to go back to and read textbooks from Finance 101 because he believed the decline in Tesla’s stock was simply due to the broader stock market and FED initiatives.
The CEO eventually did promise not to sell more Tesla stocks for the next few years. However, he said that before and didn’t follow through.
Now Gerber more specifically accused Musk of destroying Tesla’s stock in the way he sold the stock. He argues that Musk should have done a stock offering:
Instead, they were open market sales that were front-run by short sellers and some of those happened in desperation in October and November when he needed money for Twitter when Twitter revenue went to zero. A lot of those sales happened around $200 a share and he broke the stock. It went from $200 to $100.
Gerber says that the market can’t absorb $40 billion in open market sales and that the amount sold was bigger than most IPOs – hence why he argues those sales should have gone through an offering.
The investor concluded with putting the blame clearly on the Tesla board and Musk:
The board should have been all over this process, but instead, it was done at a huge expense to shareholders and there’s no excuse. And I’m not okay with it.
Gerber has been pushing for a board seat amid this whole ordeal and claims that he plans to reign in Musk and get a confirmation in writing that he won’t sell more Tesla stocks in the same way.
Obviously, what we are seeing here is someone who leads a fund and is trying to explain to his investors why they lost a lot of money over the last year.
Top comment by UNC80tjg
Could not agree more that Musk's business adventurism at a time of every increasing ev competition broke Tesla stock. Exacerbating the impact of the share sales on the Tesla stock prices is the distraction of the CEO that had the greatest long term effect. Just hubris at it's finest.
An indication of just how uniformed he was about the market Twitter is in was his surprise that Apple takes 30 points on revenue for apps downloaded from it's app store. Even an entry level developer knows that. If he was so unprepared to buy Twitter, how was he going to get up to speed without taking time away from Tesla when competition was hearing up.
Running a growing car company that all others have as their target, a rocket company that involved, well, rocket science, a tunnel boring company that is nowhere, and a neutral implant venture is the equivalent of 10 full time jobs.
Twitter is not worth the distraction. It is a nuisance.
But the argument is sound to me.
There’s no doubt that Musk’s share sales were mismanaged and that they had a massive negative impact on Tesla’s stock over the last year.
Now do I think that Gerber would be able to avoid or limit Musk’s future potential negative impact on Tesla’s stock? I don’t know. I think Musk is currently spending too much time in the echo chamber he created for himself on Twitter where his views are getting reinforced by an army of sycophants seeking his approval.
That’s the bigger problem that needs to be fixed if we want Tesla, which I still view as the most important company in the world, to have a strong leader again.
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