Tesla Inc.’s stock tumbled Friday and its junk bonds slid to a fresh low after the electric-car maker’s chief accounting officer quit suddenly after about a month in the job and Chief Executive Elon Musk appeared to smoke a joint during a filmed interview.
The stock TSLA, -6.30% was down as much as 10% in early trade, trading as low as $252.25. It ended down 6.3% at $263.24, its lowest in five months, and down 15% for the year. The S&P 500 SPX, -0.22% has gained 7% in the same time frame, while the Dow Jones Industrial Average DJIA, -0.31% has advanced about 5%.
Tesla’s 5.300% bonds fell to 84.250 cents on the dollar to yield 8.337%, according to trading platform MarketAxess. On a spread basis, the notes were yielding 541 basis points over Treasurys, a full 50 basis points wider on the day.
The stock took a nose dive after news that Chief Accounting Officer Dave Morton resigned on Sept. 4, less than a month after he joined the company, according to a regulatory filing Friday.
Morton resigned over frustration that Musk ignored his advice during the going-private saga, according to a CNBC report on Friday citing a person familiar with the matter.
“Since I joined Tesla on August 6th, the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations,” Morton is quoted in the filing as having said. “As a result, this caused me to reconsider my future. I want to be clear that I believe strongly in Tesla, its mission, and its future prospects, and I have no disagreements with Tesla’s leadership or its financial reporting.”
Adding to the gloom, the company’s head of human resources, Gaby Toledano will not be returning from a leave of absence she began last month, according to a Bloomberg report.
Morton and Toledano are the latest in a string of Tesla executives who stepped away; in May, Doug Field, Tesla’s senior vice president of engineering, took a leave of absence and eventually didn’t return. Field reportedly moved to Apple Inc., which according to a recent CNBC report has hired large numbers of Tesla employees.
Meanwhile, Musk appeared to smoke marijuana during an interview on “The Joe Rogan Experience” podcast, sparking a range of reactions Friday on the internet.
After Rogan said he was smoking marijuana inside tobacco, the podcast host asked Musk, “You probably can’t because of stockholders, right?”
Musk responded with, “I mean it’s legal, right?” Rogan then said, “It’s totally legal,” and Musk replied, “OK,” and took a drag. Both Rogan and Musk are based in California, which this year became the largest U.S. state to legalize the recreational use of marijuana.
Musk’s increasingly erratic behavior of late, which includes a notorious going-private tweet that has sparked lawsuits and a regulatory probe, as well as a protracted dispute with a British diver who helped rescue a youth soccer team that was trapped in a cave in Thailand, has raised concerns about his fitness to lead a public company.
It’s becoming clearer that “Tesla needs to a entertain a major change in the C-Suite,” analysts at Consumer Edge said in a note Friday. Hiring a co-CEO or chief operating officer would lend credibility to the company’s financials, be a steady hand to set the tone, and allow Musk to focus on innovation and product development by relieving him of some of the day-to-day duties, they said.
“The ongoing, effectively self-inflicted public relations crisis is now affecting key personnel within the organization and detracting the market from the fundamentals (which have been improving dramatically through 2Q18),” the analysts said.
Consumer Edge lowered its price target on Tesla stock to $300 from $311, giving a higher weighting to the risk associated with Musk’s stumbles.
Musk’s actions are making it “harder and harder to support Tesla as a company,” Gene Munster of Loup Ventures said in a blog post Friday. Elon is Tesla and his actions directly affect the company, he said.
Munster said he believed the shares have upside, however, and if Tesla can “sell more than 60,000 Model 3s per quarter at a gross margin of 20% or greater, the company will be successful.”