September 7, 2018 at 9:58 AM
Tesla shares plummeted Friday after two executives announced their departures from the company and video of chief executive Elon Musk smoking marijuana and drinking whiskey on a popular podcast began to circulate on social media.
The resignations of Tesla’s accounting and human resources chiefs were just the latest in a string of troubles for the electric carmaker, which has been hit in recent months by several more staff exits, as well as production struggles, lawsuits and federal investigations. The turmoil comes as investors and analysts have called on the company’s board to replace Musk with a more predictable chief executive, or to offload his responsibilities to a capable manager.
Musk smoked marijuana with comedian Joe Rogan at the end of a 2½-hour interview on “The Joe Rogan Experience,” which featured a wide-ranging discussion on topics that included artificial intelligence, Musk's technological ambitions and personal hardship.
After discussing the artistic and engineering merits of wristwatches, Rogan brought out a blunt, telling Musk that it was a mix of tobacco and marijuana. “You ever had that?” Rogan asked, noting that Musk probably had not smoked one “because of stockholders."
"I mean, it's legal, right?” Musk asked before taking a puff. The show took place in California, where recreational marijuana consumption is legal.
The podcast episode arrived at a tumultuous moment for Tesla and Musk. Last month, Musk alarmed shareholders, among others, by announcing on Twitter that a deal to take Tesla private was all but certain, only to abandon the plan 17 days later. The abrupt U-turn on the proposal still leaves Tesla to contend with federal probes, shareholder lawsuits and whistleblower complaints sparked by the initial announcement.
The company is facing a Securities and Exchange Commission probe into whether Musk had purposely misled investors to manipulate the company’s stock price and another tied to potentially misleading investors about Model 3 production problems, according to the Wall Street Journal.
Musk has also acknowledged that his intense workload of 120-hour weeks was taking a toll on his physical health, according to an emotional interview with the New York Times last month. Musk's detractors have criticized his impulsiveness and recent behavior. But even those close to him have expressed worry. Musk told the Times, “I’ve had friends come by who are really concerned.”
Some board members have also raised the issue of Musk's use of Ambien, a prescription sedative, according to the Times. Musk said in the interview that he takes the drug to help him sleep. In a tweet last year Musk said, “A little red wine, vintage record, some Ambien . . . and magic!"
On the same day that the podcast was published, two executives announced their resignations from the company. Tesla's chief accounting officer, Dave Morton, said he was leaving after considering the level of attention Tesla has received and the “pace within the company.”
"I want to be clear that I believe strongly in Tesla, its mission, and its future prospects, and I have no disagreements with Tesla's leadership or its financial reporting,” he said. Morton worked for the company for only a month.
Shortly after Morton's announcement, Bloomberg reported that Tesla's "chief people officer," Gabrielle Toledano, would not return to the company after a leave of absence.
At least 48 executives have left the company this year. But Tesla has said that the departures are at a rate typical of any large company.
Tesla did not respond to requests for comment.
In a report published Friday, Musk told the Guardian that smoking marijuana is not necessarily prohibited by company rules. “Our policy allows trace amounts of THC [an ingredient of cannabis] during work times, provided they are below the safety limit (much like a minimum alcohol level),” he said, according to the report.
Carl Tobias, a law professor at the University of Richmond, said that Musk's lighting up was not normally an issue because “people do that all the time.” But Musk's marijuana incident appears to follow a pattern of questionable behavior, Tobias said, and is further evidence of bad judgment. “It’s troubling. It may be especially troubling for board members or shareholders,” he said. “We do expect our CEOs of major companies to behave differently than ordinary people."
Earlier this week, Musk doubled down on an incendiary allegation against a British cave explorer who helped save 12 boys trapped in a flooded cavern in Thailand this summer. After the explorer criticized Musk’s efforts to participate in the cave rescue, calling it a “PR stunt,” Musk retaliated on Twitter. In the July tweet, he called the explorer, Vernon Unsworth, a “pedo guy.” Musk later apologized for labeling Unsworth as a pedophile. But investors were rattled. Musk’s critics have said that his bitter feuds with journalists, employees, rivals and others have interfered with Tesla’s mission to transform the auto industry.
And, according to an email published by BuzzFeed this week, Musk has not put the cave diver incident behind him. He repeated his attacks on Unsworth in an email to a reporter, again raising questions about his decision-making and state of mind.
The long-term viability of the $50 billion automaker hinges on the success of the Model 3, a mass-market battery-powered vehicle envisioned as the pathway to Tesla’s profitability. But the Model 3 had been plagued by production delays. Recent months at the company’s Fremont, Calif., plant were defined by an urgent, all-hours flurry, which Musk has described as “production hell.”
Tesla has not made an annual profit in 15 years, but Musk has pledged that will end in the second half of the year. After reaching a long-delayed goal in June of producing 5,000 Model 3 sedans per week, Tesla said last month that the company should be able to sustain that pace throughout the third quarter.
Tesla's stock closed down more than 6 percent Friday.
Drew Harwell contributed to this report.