Tesla Motors Inc (NASDAQ:TSLA) had some shock news for shareholders at yesterday’s annual meeting. It wasn’t about the firm’s self-driving car, or about the Model X, however. CFO Deepak Ahuja is going to retire. Tesla’s head of accounts is going to stay at the firm to oversee the transition, but stock fell by more than 2% on Wednesday in the wake of the news.
Ahuja has overseen the financial miracle that is Tesla Motors, and his loss will be noticed at the company. Speaking about his decision he told those gathered that the “solid foundation for Tesla’s long-term success,” was already built.
Analysts react to Tesla Motors CFO departure
Brad Erickson of Pacific Crest, in a report published in the wake of the Tesla Motors meeting, said that “Given that the company could arguably be heading toward another capital raise before the end of the year, this is not likely to be a positive for sentiment.”
Tesla Motors is, as it showed clearly in its last earnings report, hurting for cash. When the firm released that report Adam Jonas of Morgan Stanley said that “Cash burn was eye watering, raising the stakes for an on-time and good quality Model X launch.”
Mr. Erikson said that there were problems with that launch, “Mr. Musk’s commentary around Model X launch timing was admittedly vague, expectations for deliveries to begin in “three to four months” raises the probability of risk to our estimates.”
Ahuja joined the company in 2008 and has stuck with it through thick and thin. He was in charge of the firm’s IPO, and he was likely on Musk’s speed dial from the time he almost sold his firm to Google to the time the firm was linked to a deal with Apple.
Uncertainty is bad for Tesla
It’s hard to think of a worse time for Tesla to be left by its CFO. The firm is quickly running out of cash, and it’s going to be making accounting leaps in order to keep itself running for many years. Elon Musk doesn’t expect Tesla Motors to make a real profit until 2020, and the firm will need a quality CFO in order to keep the firm going while he burns cash.
Ahuja is, for the time being, leaving Tesla Motors in a very precarious financial position. With less than $1 billion on hand, the company will struggle to meet expenses going forward unless it gets its hands on additional cash. With the exec more or less out the door at the firm that’s going to be hard to put together.
Tesla has, under Mr. Ahuja’s leadership, raised cash from both new stock issues and debt issues. The firm’s debt load is getting concerning, however, and with stock far lower than last year’s highs, it’s not clear how much of an issue traders will accept before selling out of the stock.
Tesla Motors will release its numbers for the third quarter around the end of July. The firm will be expected to reveal some kind of financing by then. If not its short term future will be questioned.
If Deepak Ahuja is not replaced by then, the firm will be hit hard by his departure. That’s why Tesla stock is crashing today, and it’s why investors should be worried about the shuffling at the top of the car-maker.