Tesla shares fell as much as 5% on Monday as CEO Elon Musk’s flirtation with taking the company private fueled doubts about his leadership.
Musk announced late Friday that the automaker would remain a public company, saying in a blog post that shareholder sentiment was against the proposal and the process of taking Tesla private would have been “even more time-consuming and distracting than initially anticipated.”
“I’m incredibly excited to continue leading Tesla as a public company,” he enthused.
But Tesla shares dropped more than 5% in European and pre-market trading in New York as Wall Street analysts expressed doubts about the future of Tesla under Musk, with some favoring bringing in fresh blood to serve as a chief operating officer.
“Musk’s involvement in the company is critical, but now more than ever a solid #2 — someone with strong operational background that can help Tesla move from ideas to execution — is crucial,” Joseph Spak of RBC Capital Markets wrote in a client note.
Jefferies analyst Philippe Houchois suggested that with Tesla’s “long-term mission intact but short-term growth shaky, serious gaps in execution skills and a board under pressure for not assuming its duties, now may be the time for third parties to get involved, be it from technology or even oil.”
As CNBC reports, Tesla has been buffeted by “weeks of controversy and stock volatility” since Musk announced on Aug. 7 that he was considering taking the company private at a $420 per share price and had funding “secured” for the deal.
With the buyout idea now off the table, “attention was zeroing in on Tesla’s efforts to become profitable, its cash reserves and what steps Musk could take to raise fresh capital,” Reuters said.
Tesla lost nearly $2 billion last year, and through the first two quarters of this year it had burned through about $1.8 billion in cash after capital investments.
Nomura Instinet analyst Romit Shah noted that Tesla’s board of directors has reaffirmed its support for Musk.
“That should come as a big relief because Tesla can’t work without Elon Musk, in our view,” he said.