Elon Musk Addresses Rumors of Stepping Down as Tesla CEO
According to an article in the Wall Street Journal, there has been speculation that Zachary Kirkhorn, Tesla's Chief Financial Officer, is being considered as a potential successor to the billionaire. This has caused a range of emotions among Tesla investors and fans over the past 48 hours.
On May 11th, Elon Musk announced that he had found a CEO to take his place at the helm of Twitter. He had acquired the social media platform for $44 billion in October and had been focused on revamping it to protect his investment, especially during the economic downturn that made advertisers more cautious.
As the "Techno King," Musk has been devoting himself entirely to the Twitter revamp, aiming to reduce the company's dependence on advertising. However, in the second quarter of 2022, which is the last available data, more than 91% of Twitter's revenue came from advertising.
Musk's Bet on Cost Reductions and Subscriptions: Impact on Twitter and Tesla
Musk has placed a big bet on drastic cost reductions and subscriptions as a way to boost the profitability of Twitter. In particular, he has revamped Blue, Twitter's subscription service, by integrating the blue account verification checkmark. This badge, which used to be free on Twitter 1.0, now comes at a price - $7.99 per month for individuals and $1,000 per month for organizations.
While these efforts are good for the Twitter platform, they have had a negative impact on Tesla, which has been left behind by its charismatic leader to the disappointment of many shareholders. As a result, Tesla suffered a significant stock market decline last year, with its stock price dropping by 65% in 2022 despite its strong fundamentals. This collapse has angered major shareholders such as Leo KoGuan and Ross Gerber, with the latter publicly criticizing Musk - a rare occurrence within the Tesla community. They hold Musk personally responsible for the group's stock market debacle.
Gerber Criticizes Tesla BOD and Musk's Tactics, Twitter CEO Succession Plan Fails to Impress Investors
On December 16, Gerber took to Twitter to express his frustration with the Tesla Board of Directors for not addressing the $600 billion reduction in Tesla's wealth. He called the situation "wholly unacceptable." Meanwhile, Musk, a master tactician, was quick to read the situation and on December 20, he organized a poll on Twitter asking users whether or not he should continue to lead the company.
After nearly 18 million users voted, Musk announced that he would step down as CEO of Twitter and run only the software and servers teams until he finds a replacement. On May 11, he revealed that he had found his replacement, Linda Yaccarino, and made her name official the next day. However, the announcement did not have the desired effect on investors and Tesla fans. The stock closed down 2.38% on May 12, the first trading session following the announcement.
Despite Musk's efforts to put an end to the distraction of Twitter and focus on Tesla, investors were disappointed with the succession plan. The reasons for this disappointment remain unclear.
"Devote More Time to Tesla"
On the same day, the Wall Street Journal published an article titled "The Executive Who Keeps Tesla Rolling Isn't Elon Musk," which introduced Zachary Kirkhorn, Tesla's chief financial officer, as the shadow chief operating officer who is admired inside Tesla because he knows how to navigate between the different demands of his challenging boss. The article compared Musk and Kirkhorn to Apple's Steve Jobs and Tim Cook. The discreet Kirkhorn, who does not really mingle with financial analysts like most of his peers, is able to put Musk's vision into practice.
According to the WSJ, while Tesla does not have a clear second-in-command, Kirkhorn handles many day-to-day duties like a chief operating officer, and Tesla's board members have discussed him as a possible successor to Musk as CEO, citing a person close to the matter. Last November, during his testimony in a Delaware trial over the 2018 pay package Tesla granted Musk, board member James Murdoch said that Musk has identified a potential successor to the CEO role and shared this with Tesla's Board of Directors.
During a trial in Delaware last year, Tesla board member James Murdoch revealed that Elon Musk had identified a potential successor to the CEO role "in the last few months." However, Murdoch did not disclose the name of the person. The trial was related to a lawsuit filed by Tesla shareholder Richard Tornetta, who accused Musk and the board of granting the CEO a $56 billion compensation package without requiring him to work full-time and using his power to obtain the package.
On May 12, despite Tesla naming a Twitter CEO and raising prices, the stock fell 2.3% due to a Wall Street Journal article suggesting that Elon Musk may step down as CEO of Tesla and be replaced by CFO Zach Kirkhorn. Tesla investor Gary Black expressed concern on Twitter, calling the story nonsense and urging Musk to address the rumors. Another shareholder, Eva McMillan, also pleaded with Musk to deny the rumors. Musk eventually responded, stating that he will be devoting more time to Tesla and that he has no intention of passing the baton to anyone else. He is expected to repeat this at the Tesla annual shareholder meeting on May 16 in Austin, Texas, in order to put an end to the speculation.
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