For Tesla, life without Elon Musk once seemed like a long way off. Now, however, it could be imminent. The Securities and Exchange Commission sued Musk on Thursday, accusing him of fraud and asking a judge to remove him as CEO and chairman of Tesla, Quartz reports.
That move raises the serious possibility that Tesla could be forced to find a new leader at a crucial time for the company, which is fervently trying to end its money-losing ways and improve its fledgling production of the vital Model 3 electric car.
“Tesla and Musk are inextricably connected,” Autotrader analyst Michelle Krebs said. “Without Musk, if that should happen … can it maintain that strength of brand and almost cult-like following?
The thought of Tesla without Musk is like Ford Motor Co. without Henry Ford. It is unthinkable until, one day, it happens.
But with the recent developments, Tesla may need to drive away without Elon Musk. But could Tesla succeed without its CEO?
The market is not so sure. The company’s stock plunged 14% after the news of the SEC’s suit broke, one of its lowest points since 2017. For the last decade, Musk has been inextricable from Tesla. The quixotic executive transformed a tiny car startup into a $45.2 billion behemoth that is mass-producing electric cars, solar panels, and batteries, eclipsing the market cap of brands such as Ford.
Musk has this unique ability to conjure up funding, publicity, and demand for products ranging from flamethrowers to the $250,000 Founder Series Roadster – and yes, it has defied anyone’s predictions. In fact, despite the Model 3’s production woes, it still ranks among the world’s most successful product launches, with 420,000 people depositing a collective $420 million for a car that wasn’t even manufactured yet.
But many investors, not just short sellers, might welcome new leadership at the top. Musk’s allies have been privately writing texts and openly writing letters begging the CEO to focus on building profitable cars, and lay off antics on Twitter. The SEC’s lawsuit, a possible criminal case by the Department of Justice, and a raft of class-action lawsuits laid the groundwork for his eventual ouster.
As his leadership loses its luster, is there a model for Tesla to thrive without Musk at the helm? Truth be told, without him at the helm, Tesla could face radical changes.
One of the many possibilities is that Tesla (obviously) would find or appoint a successor, who almost certainly would come from outside the company. The candidate could also be found outside the auto industry, much like Ford hired CEO Alan Mulally in the 2000s to execute a turnaround, Krebs suggested.
But possible contenders for the job are extremely difficult to identify.
“Given the financial condition of the company, production problems and logistics/ delivery problems, it is unclear how quickly the Board could bring in a seasoned automotive executive even if they wanted to,” Cowen analyst Jeffrey Osborne wrote.
It is also highly possible for Musk to negotiate a diminished role at Tesla as part of a settlement with the SEC, likely serving in a visionary or engineering role capacity.
It would not be unprecedented actually. Sometime in 2003, the SEC sought to bar lifestyle guru Martha Stewart from serving as a director and restrict her activities as an officer of any publicly traded company when the regulator accused her of insider trading in shares of biopharmaceutical company ImClone Systems.
However, a 2006 settlement imposed a lesser penalty: a five-year bar on Stewart serving as a director of a public company and a five-year restriction on the scope of her service as an officer or employee of such a firm.
She had already resigned as CEO and chair of Martha Stewart Omnimedia in 2004 after being found guilty on criminal charges of obstruction of justice and other allegations. She took on the role of the company’s founding editorial director. But in 2011, Stewart rejoined the company’s board of directors.
Musk has previously contemplated the possibility of one day relinquishing his post as CEO and focusing on product development. This outcome would allow Tesla to maintain Musk’s appeal while fixing its operations under new executive leadership. But it is unclear whether strong-willed Musk could defer to a newcomer.