Tesla CEO Elon Musk needs to shut up about some things, but not step down-

Tesla CEO Elon Musk needs to shut up, but not step down:

Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber — a Tesla investor himself — joins Yahoo Finance to discuss Tesla’s performance and how he feels about Musk’s position as CEO.

“The cost of Elon’s behavior is really hurting shareholders and it’s really unfortunate because the reason we’re holding the stock is the long-term potential of Tesla is immense. So, you know, it’s this catch-22,” Gerber explains.

Gerber says that “Elon is eroding the value of the brand” and that Musk needs to “shut up” and stop “railing” on immigration issues.

JOSH LIPTON: Shares of Tesla are tanking to start 2024. They are down more than 25% now, and some analysts getting a bit nervous. The latest, the team at Daiwa Capital Markets downgrading Tesla to neutral with issues surrounding CEO Elon Musk piling up. Our next guest says he’s lightened his Tesla position substantially over the last six months. Joining us now is Ross Gerber, Gerber Kawasaki Wealth and Investment Management CEO.

Ross, it is always good to see you. So maybe I’ll start there, Ross. The team at Daiwa, as we mentioned, they downgraded Tesla to neutral, Ross, and they’re telling their clients corporate governance concerns aggravating already tough financial conditions in 2024. So they’re going a bit cautious. What do you think of that take, Ross? Do you agree with it?

ROSS GERBER : Yeah. I mean, there’s just a list of concerns that that’s just one of them and probably one of the least important of the concerns considering the rapidly declining earning estimates and the lack of any transparency of what Tesla sales will be this year.

And so Tesla went from a very fast-growing company with lots of potential to now basically sort of almost like stalling and really stuck almost desperately trying to sell their vehicles now. And, you know, it’s really problematic because I think it’s all self-inflicted. You know, Tesla is a great company with a CEO who is severely conflicted is the nicest way to put it.

JULIE HYMAN: So Ross, you guys have lightened your load in terms of how many shares you own, but you still own a lot of shares.

ROSS GERBER : Yeah.

JULIE HYMAN: So I’m just– you know, what keeps you– what keeps the faith when you’re looking at Tesla here? What keeps you in the stock? There’s a big universe of stocks out there, so what keeps you in this one?

ROSS GERBER : Well, you have to look at our situation. We bought Tesla at $3 a share, so for us, it’s all profit. So every time I sell Tesla for many of my clients, there’s a tax consequence of up to 30% of that profit. So that’s something we have to really consider when we’re selling the stock. Now, many of our clients do have it in retirement accounts like IRA accounts, which gives us a lot more flexibility.

But it’s really about what allocation is right for our clients, and Tesla was our largest holding for a very long time. But when– you know, it really started with the anti-Semitic comments, and we had clients calling to sell their Tesla stock who are now very happy because they sold more like a $250 a share.

And, you know, we continue to believe that Elon is eroding the value of the brand, and so we continued to sell the stock where appropriate to get it down to an allocation where we’re at now, which is around 3% in our ETF GK and for our clients around 3% to 4% depending on their situation.

Now, we do have some Tesla-fanatic clients that don’t want to give up their stock, but it’s hurting. It’s hurting people a lot this year. And finally, the cost of Elon’s behavior is really hurting shareholders. And it’s really unfortunate because the reason we’re holding the stock is the long-term potential of Tesla is immense. So it’s this catch-22.

JOSH LIPTON: And Ross, when you say that Elon Musk is eroding the brand, I’m just interested because a lot of people, Ross, when they think of Tesla, they think Musk. And when they think Musk, they think Tesla. I mean, they think of him as just foundational. Are you suggesting you’d like him to sort of exit stage right here?

ROSS GERBER : No, I mean, really it’s just to shut up. I mean, you know, he spends his weekend just railing on immigrants and the immigration issue, and he himself being an immigrant. And the perception of somebody who’s intelligent who can get an H-1B visa saying that people who don’t have educations don’t deserve to be in this country is really not a way to sell cars, especially in a state like California, its biggest market, where Tesla sales are down year-over-year, one must finally accept the reality that Elon’s white supremacist motivations is absolutely damaging the brand because he is equated to Tesla. But to pretend that he’s not damaging the brand at this point is simply ignorant.

JULIE HYMAN: So Ross, how do you fix it? Because there have been suggestions. I know you yourself had sort of a short-lived run for the board at Tesla. There have been suggestions that the board is too close for him, that they’re not keeping him in check. But is there any realistic expectation that there could actually be independent or more independent board members added at Tesla?

ROSS GERBER : Well, I think this is the pickle. And one of the reasons we’ve sold a big chunk of stock was because I don’t see how this works. Because when I ran for the board, I realized very quickly that there was actually no desire for independence or any retail investment representation on the board at all.

I was like this is definitely not a welcome wagon, you know. And so, you know, I got out of it, and now I’ve decided to sell some of my stock because I think that’s what investors have to do when the company and the board isn’t going to behave in the best interests of its shareholders, which it’s really behaving in the best interests of one of its shareholders and not the other 87%.

So I think this is a real problem for Tesla. I don’t see how the board can move forward in its current makeup because anything they do will be sued because essentially, Delaware has ruled that it’s not an independent board. And it’s a requirement, you know, that it is an independent board. So if they get new board members that are truly independent of Elon, this isn’t going to work very well for Elon. And I’m sure he doesn’t want that.

And, you know, I want to make it very clear, it’s not my goal to be on the board of Tesla. I’m done with that. I have no desire at all. And nor is it my goal to see Elon leave Tesla. My goal is for Elon to leave Twitter and to go back to Tesla. He needs to get off Twitter and stop making his outrageous opinions known to the public on a daily basis and go back to his job as CEO of Tesla. And that’s really what needs to happen.

And so if that doesn’t happen, I think Tesla is drifting in a place where I don’t know where it goes until there’s somebody or somebody on the board that actually wants to confront Elon and expects Tesla to get better results.

JOSH LIPTON: But Ross, you know, you kind of know, though, when you invest with Elon Musk, he is a different kind of CEO, right? I mean, you know that when you commit capital to his companies, Elon isn’t Jamie Dimon, right? He’s a different kind of guy. He’s going to make his opinions known. I mean, you have to know that as an investor before you move in, right?

ROSS GERBER : Well, I’ve been doing this for 10 years with Elon and Tesla. And, you know, it’s interesting when he needed money and Tesla was on the verge of bankruptcy, he was very nice to me and everybody else who was giving him money that supported Tesla. Everybody thinks it’s only Elon, and Elon, obviously, is the innovator of our time. But there were many investors like myself and my firm and several other firms that stepped up when nobody else would. And Elon was a different guy back then.

So now that he’s successful and he’s the richest man in the world, he decides to use his capital to buy a social media app so that he can express outrageous opinions on a daily basis. You know, this is just not a good development for the company.

You know, it’s just like Napoleon. Napoleon started off really well as well and had a pretty good run until he got involved with Russia. So Twitter is like Elon’s Russia, and he’s going to end up on Elba if he keeps this up. So I just I love somebody to try to talk some sense into this guy. He’s certainly not listening to me.

JULIE HYMAN: Ross Gerber, maybe he’ll watch this interview. We’ll see. And he’ll listen.

ROSS GERBER : He probably will. I’m sure.

JULIE HYMAN: Ross, thanks a lot. Good to see you. Appreciate your perspective.