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A rough week for Elon Musk was capped on Friday when institutional shareholders in Tesla admonished the company’s board of directors to rein in an “over-committed” CEO Elon Musk in an open letter made public on Friday.
The letter follows the mid-air explosion of the SpaceX Starship rocket in its first test flight on Thursday, and a first-quarter Tesla earnings report on Wednesday that saw net income decrease more than 20% from the prior year on narrowing margins, sending Tesla shares down almost 10% Thursday and erasing nearly $13 billion from Musk’s net worth, according to the Bloomberg Billionaires’ Index.
Musk also waded into controversy with Twitter again, eliminating verified status from the accounts of most non-paying subscribers and eliminating markings for government officials and accounts, raising the specter of impostors running rampant on the platform.
What the letter says
The Tesla investors, who say their holdings amount to more than $1.5 billion, want the board to bring in more independent members, and work harder to solve issues at the company that can pose “substantial legal, operational, and reputational risks,” to the electric vehicle maker, “jeopardizing its long-term value.”
The investors are particularly concerned with Musk and Tesla’s handling of human rights and workers’ rights. Their letter recounts many lawsuits in which Tesla has been sued over: racial discrimination, union-busting, wage theft, sexual harassment and unsafe working conditions.
“Tesla appears to be embracing a broader culture of being ‘above the law,'” they wrote, adding that Tesla now faces criminal probes by the U.S. Department of Justice, the National Highway Traffic Safety Administration (NHTSA) and California’s Department of Motor Vehicles over its Autopilot technology and claims about self-driving.
“Instead of working to address problems with regulators, CEO Musk has made derogatory tweets and comments, fueling tensions,” they wrote.
The open letter to Tesla’s board comes after Tesla shares have declined more than 15% over the past month.
Nia Impact Capital’s Kristin Hull told CNBC the letter is meant as a “call to action” and she is hoping that Tesla chair Robyn Denholm will take the time to write a meaningful reply, at a minimum. “We want to see the board take their job seriously – we don’t see them doing a good job at being Elon Musk’s boss.”
Eroding margins, exploding rockets
While shares of Tesla were ticking higher in early trading on Friday, the company’s first quarter earnings update this week revealed ballooning inventory levels and eroding profit margins.
According to the company’s investor presentation for the first three months of 2023, Tesla owes vendors $7.32 billion, and holds $14.38 billion in inventory after ramping up production in its factories and implementing price cuts through the first quarter.
While Tesla raised prices on Model S and X vehicles in some markets Friday, those models represent a minor slice of overall sales and production for Tesla today. The modest price hikes were also accompanied by an incentive — three years of free Supercharging on the company’s electric vehicle charging network.
Tesla’s stock price slide has a direct effect on Musk, whose personal wealth is mostly derived from his Tesla holdings, as he lost approximately $13 billion of his on-paper net worth the day after Tesla’s first-quarter earnings.
Also on Thursday, Musk’s U.S. defense contractor also launched its Starship Super Heavy vehicle in an orbital test flight from its Boca Chica, Texas facility.
As CNBC previously reported, the rocket made it off the launch pad — a triumph of sorts — but it also exploded, resulting in the Federal Aviation Administration grounding the program for the time being until further evaluation.
Before the explosion, local environmental and indigenous rights groups protested the launch anticipating harms to wildlife, people’s health and property.
CNBC reached out to Texas Fish and Wildlife Service and the FAA for more details. A spokesperson for the FWS said the agency is now gathering information about any impacts from the explosion to habitat and wildlife in the area, and the FAA did not immediately respond to a request for comment.
Meanwhile, Musk continues to make controversial moves with Twitter, the social media platform he bought last year for $44 billion, selling billions of dollars worth of Tesla stock to help fund the purchase.
This week, Twitter removed verified status from public figures and government accounts, including President Joe Biden, public figures including the Pope and even transit agencies including San Francisco’s BART.
Musk-led Twitter also removed “government-funded” and “China state-affiliated” labels from Twitter accounts of a myriad of global media organizations. The labels implied government involvement in editorial decisions by those outlets. Most notably, Reuters first reported, Twitter dropped the “China state-affiliated media” label from the accounts of Xinhua News, and from the accounts of journalists associated with those publications.
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