Thursday 17 January 2019

Musk faces challenge - but may be shielded by investors

Elon Musk, co-founder and CEO of Tesla Motors. Photo: Jerry Lampen/AFP/Getty Images
Elon Musk, co-founder and CEO of Tesla Motors. Photo: Jerry Lampen/AFP/Getty Images

Ross Kerber

Tesla chief executive Elon Musk faces votes at a shareholder meeting today that will challenge his grip on the electric carmaker, but he may be able to count on some powerful friends: big fund managers likely to be fans.

These stockpickers would have weighed Mr Musk's forceful public persona in their decisions to buy and hold Tesla shares in the first place, and are likely to be ready to back him at the meeting to be held in Mountain View, California, said analysts, corporate governance experts and investors.

They expect shareholders to elect three Tesla directors and vote to let Mr Musk keep his chairman's title despite investor challenges and broader concerns with Tesla's production.

"We're making a bet on Elon Musk," said one top-20 Tesla investor who plans to back the directors and vote to keep Mr Musk's roles intact. The investor compared Mr Musk to Apple founder Steve Jobs, saying: "These people are geniuses. You either believe in him or you don't."

David Whiston, an analyst for Morningstar, said: "I doubt they [big, actively managed funds holding Tesla] would vote against Elon because if you don't believe in Elon, why are you in the stock?"

Tesla has been fighting negative press for several months over production bottlenecks for its Model 3 sedan, crashes involving its cars and doubts raised by Wall Street over its cash position. Union-affiliated investment adviser CtW Investment Group is attempting to unseat three Tesla directors it says lack qualifications or independence, including investor Antonio Gracias, Tesla's lead independent director; James Murdoch, the CEO of Twenty-First Century Fox Inc; and sustainable food executive Kimbal Musk, Elon Musk's brother.

Another investor proposes splitting the chairman and CEO jobs, both of which Mr Musk fills, arguing the sprawling company has become difficult to oversee.

If any of the challenges wins a majority of votes, that could undermine confidence in Mr Musk at a time when he is counting on workers to pull out the stops to ramp up production of the Model 3 sedan and as some analysts expect the company to raise new capital. Shares are down around 7pc year-to-date.

Tesla says it does not need new funds and that its governance structure allows it to avoid pressure by short-term investors.

Anne Sheehan, who retired earlier this year as head of corporate governance for the California State Teachers' Retirement System, said she expected big funds would vote according to board recommendations and raise any concerns privately with Mr Musk.

Their message, she said, will be: "If he's a car company, he's got to produce cars." (Bloomberg)

Irish Independent

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