A turbulent week for Elon Musk culminated on Friday when Tesla’s institutional investors, collectively holding over $1.5 billion in shares, penned an open letter urging the company’s board to control the embattled CEO. The letter comes after the mid-flight explosion of SpaceX’s Starship rocket during its inaugural test flight and Tesla’s Q1 earnings report revealing a 20% decline in net income compared to the previous year, which led to a nearly $13 billion reduction in Musk’s net worth.
The shareholders are particularly concerned with Tesla’s handling of human rights and workers’ rights issues, citing numerous lawsuits involving racial discrimination, union-busting, wage theft, sexual harassment, and unsafe working conditions. They also pointed out that Tesla is currently under investigation by the U.S. Department of Justice, the National Highway Traffic Safety Administration, and California’s Department of Motor Vehicles regarding its Autopilot technology and self-driving claims.
Call to Action: Strengthen Tesla’s Board and Address Issues
The investors requested that the board introduce more independent members and tackle problems posing “significant legal, operational, and reputational risks” to the electric vehicle manufacturer. They criticized Musk for exacerbating tensions with regulators through derogatory tweets and comments instead of addressing the issues.
Nia Impact Capital’s Kristin Hull described the letter as a “call to action,” expressing hope that Tesla Chair Robyn Denholm would provide a meaningful response. Hull stressed the need for the board to take its role seriously in overseeing Musk.
Tesla’s Q1 earnings update this week also revealed increasing inventory levels and shrinking profit margins. According to the investor presentation, Tesla owes vendors $7.32 billion and holds $14.38 billion in inventory following production ramp-ups and price cuts during the first quarter.
Although Tesla increased prices on Model S and X vehicles in select markets, these models represent a small portion of overall sales and production. Furthermore, the price hikes were accompanied by an incentive of three years of free Supercharging on Tesla’s electric vehicle charging network.
The decline in Tesla’s stock price directly impacted Musk, whose personal wealth is primarily tied to his Tesla holdings. He lost approximately $13 billion of his paper net worth following the Q1 earnings report.
On the same day, SpaceX’s Starship Super Heavy vehicle exploded during an orbital test flight, leading the Federal Aviation Administration to temporarily ground the program pending further evaluation. Local environmental and indigenous rights groups had protested the launch, anticipating potential harm to wildlife, health, and property.
Musk’s Controversial Moves on Twitter
Musk has also made contentious decisions on Twitter, the social media platform he purchased last year for $44 billion by selling billions of dollars’ worth of Tesla stock. This week, Twitter removed verified status from public figures and government accounts, including President Joe Biden and the Pope. The platform also eliminated “government-funded” and “China state-affiliated” labels from various global media organizations’ accounts, implying government interference in their editorial decisions.
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