Shares of Tesla Motors Corp. TSLA closed more than 3.8% lower on Wednesday after a group of investors urged the company to add new independent directors to its board that do not have any prior ties to Elon Musk.
In a letter penned by representatives from several major Tesla investor groups, the corporate governance of the Silicon Valley-based electric carmaker was called into question.
“We expect that as companies make the transition to publicly traded status, the governance structures and practices in place at the time of the IPO will evolve to align with the company’s changing strategy,” the note said. “However, Tesla’s seven-member board is largely unchanged from its pre-IPO days. In fact, only one of the current directors has been appointed since the IPO in 2010.”
The group suggested that the board appoint two new directors that have no prior “personal or professional relationships” with Elon Musk, and it also called on the directors to hold staggered annual elections for the board.
As mentioned in the letter, several of Tesla’s directors were brought on board many years ago and have previously worked with Musk in some way.
For example, Tesla’s board currently includes Elon’s brother Kimbal Musk, as well as Brad Buss, the former chief financial officer of SolarCity. Elon Musk served on the SolarCity board for several years before Tesla purchased the solar energy company last year.
Elon Musk, never afraid to stick up for his company, took to Twitter to not only defend Tesla, but also promise that new members of the board were coming:
@Reuters This investor group should buy Ford stock. Their governance is amazing ...— Elon Musk (@elonmusk) April 12, 2017
@Reuters Besides, I already said we'd add more independent members during SCTY merger. Will announce soon, but this group has nothing to do with it.— Elon Musk (@elonmusk) April 12, 2017
News of the letter, which was dated on Monday, broke the same day of the release of a new study suggesting that Tesla’s Model S is one of the hottest used cars on the pre-owned market.
According to Autolist.com’s data, used Model S cars tend to sell about 5% faster than their peer group average. The study also described the Model S as being in “a league of its own” for sale prices compared to listing price expectations. In short, used Model S vehicles are selling quicker, and for more money, than their industry rivals.
And it’s exactly these types of results that keep many investors confident in the leadership of Elon Musk. Tesla has shown remarkable growth over the past several years, and the company consistently delivers quality cars.
Sure, there are still plenty of question marks surrounding the carmaker’s debt load, but I’m not sure it is time to start turning on Musk quite yet.
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