Elon Musk, the unstable founder and CEO of Tesla Inc. (NASDAQ: TSLA), runs the electric car company as if he owns it. He does not. His position as head of Tesla is vulnerable because he only owns 21.9% of the public corporation’s shares, according to its proxy.
Musk is not the only large shareholder of Tesla. FMR, part of gigantic mutual fund company Fidelity, owned 10% of the shares as of the last proxy filing. T. Rowe Price held 7.6%. While together this is not enough to cause Musk problems, Tesla likely will have other institutional shareholders who are weary of his antics.
The case for Musk’s ouster is based on his erratic behavior, whether it is smoking pot, insulting securities analysts or claiming he has funds to take Tesla public. His board has made no move to dismiss him, likely on the belief that as founder and the brain behind the company’s electric car company he is indispensable. It has become evident that his value to Tesla has been eroded by his behavior.
Musk does not have the significant advantage founders of some large tech companies do. Several of them control most or all of the voting stock in their companies, which makes them nearly invulnerable to actions by their boards to dismiss them. The best known of these is Facebook Inc. (NASDAQ: FB) founder Jeff Zuckerberg, who controls more than half of the company’s voting shares.
Tesla’s board has shown no sign that it wants to get rid of Musk. If his behavior becomes more disturbed, that could change. That behavior has started to hurt Tesla’s stock price, which may be most of what the board needs to make a decision. The stock is down 29% in the past month. At some point, the board will find it hard to defend its position on the founder.
Musk could lose his job soon if his behavior worsens. And he does not have the shares to hold on if the board decides it has had enough.