Tesla executive turnover causes concern among investors

Washington — The retirement of Tesla Inc. Chief Financial Officer Deepak Ahuja is prompting questions about the company's sustainability among financial investors who are jittery about the Silicon Valley company's high turnover rate among top ranking executives. 

Between September 2009 and June 2018, Tesla lost 69 executives, according to a list compiled by investor Jim Chanos, a prominent short seller of Tesla's stock. Chanos' list includes Ahuja, 56, who left Tesla in 2015 and returned in 2017.

Even CEO Elon Musk was forced by the U.S. Securities and Exchange Commission to step down as chairman of Tesla's board of directors for at least three years after sending controversial tweets about taking the company private. He was allowed to remain in the CEO position. 

Ahuja's departure, announced as Tesla confirmed losing nearly $1 billion last year, caused analysts and stock market observers to again question Musk's promises about moving Tesla closer to consistent profitability. 

David Kudla, CEO of Grand Blanc-based Mainstay Capital Management LLC, said investors have gotten used to constant churn in Tesla's executive ranks. But he said the departure of high-ranking financial officers like Ahuja usually raise eyeballs on Wall Street.  

"I don't think anybody is surprised by the next executive departure at Tesla," Kudla said. "There's a little bit of a heightened awareness when it's somebody from engineering or finance. ... When it's somebody from finance, the question is what might they doing with the books at Tesla." 

Kudla noted that unlike Ahuja, who is retiring, several other Tesla executives have departed the Silicon Valley automaker recently or have gone to other companies that are seen as being on the cutting edge of technology like Uber Technologies Inc. 

"If someone in that position again and again and again looks around and says 'it's time to go,' what does that say about the future of the company," he said. 

After posting two consecutive profitable quarters to close 2018, Tesla cut its losses from $1.9 billion in 2017 to $976 million. Musk has said he expects Tesla to be profitable in each quarter of this year, but the company will have to do so without its CFO, who was in his second stint as Tesla's top financial officer. 

Tesla stock fell from a close of $308.77 on Jan. 30 to an open of $301 following the announcement of Tesla's fourth quarter 2018 performance and Ahuja's departure.  

Tesla pointed Wednesday to Musk's statements about both Ahuja's departure and the company's financial position in a Jan. 29 filing with the SEC and during a call with investors on Jan. 30. 

Musk expressed confidence during the call that Tesla is in position to deliver profitable results, despite Ahuja's departure. He said that Ahuja will be replaced by Zach Kirkhorn, who is currently Tesla's vice president of finance. 

"Even if there's a global recession, we're expecting deliveries this year to be about 50 percent higher than last year," he said. "Could be a lot more than that, but even with tough economic times to achieve 50 percent growth is pretty nutty."

Ahuja said he is retiring now because Tesla achieved consecutive profitable quarters and increased its cash position by $753 million in the fourth quarter of 2018, improving to $4.3 billion.

"There's no good time to make this change," he said on the call with Tesla investors. "We felt strongly this was a good time. It's a new chapter, new year. ...  It's on a really solid foundation. I feel really good about Zack taking over as the CFO." 

Kudla said Musk dominates headlines about Tesla because he has developed a "cult-like" following. But he said the executive turmoil is likely troubling for investors because Musk has displayed erratic behavior like picking fights with the Securities and Exchange Commission and smoking marijuana on a live podcast with comedian Joe Rogan. 

"You want to know there's some steady hands at the wheel," he said. "As much as there's that cult-like following for Elon Musk, and maybe they like seeing him doing some of those things, ... there's people like me who are looking at whether they should invest in this company and the departures are troubling. There's always going to be departures in a company, but the ratio at Tesla is very high." 

Mark Yusko, CEO and chief investment officer of Chapel Hill, N.C.-based Morgan Creek Capital Distributors, also expressed skepticism about Tesla's story that Ahuja is departing because he is ready to retire at a really young age. 

"There is no part of that statement that I believe," Yusko said. "CFOs don't depart because things are good. That's not how the world works." 

He added: "It's never good when a CFO leaves for a company, just generally speaking that's a bad signal to the market. Especially when it's on top of other departures." 

Yusko said Ahuja's departure "reinforces my view that there are lot of operational challenges at Tesla and a lot of management challenges." 

Michelle Krebs, senior analyst for Autotrader, said changes in Tesla's executive suite typically draw attention from both analysts and market watchers. 

"People, especially those on Wall Street, pay attention to everything, including management turnover, that happens at Tesla," Krebs said.

Krebs said 2018 was a rough year for Tesla as it tried to ramp up production of the Model 3 sedan, which is supposed to be the electric-car maker's affordable and accessible entry into the U.S. market. She noted that Tesla has to continue to try boost Model 3 production as it strives for more profitable quarters, and the company has a significant debt bill coming due on March 1. 

"With its challenges as a backdrop," she said, "any departure of a high-level manager, especially one in charge of the books, causes concern." 

klaing@detroitnews.com

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Twitter: @Keith_Laing