In late January, we noted that Tesla (TSLA: $342/share) CEO Elon Musk’s executive compensation plan raised significant red flags. Since then, proxy advisor Glass Lewis recommended investors vote against the proposal, which could grant Musk performance-based options worth over $2.6 billion. The red flags haven’t stopped there. More executive departures, more missed production projections, and competitors taking market share have left Tesla’s sky-high valuation with even more downside risk.

Recent Departures Fail to Stoke Confidence

The launch of the Model 3 marks a critical period for Tesla. As the company struggles to hit production targets on its first mass-market vehicle, one would hope the executive team is confident in the company’s future and working as a cohesive unit. Instead, the company is losing top executives at an alarming rate.

In February 2017, Jason Wheeler, then Tesla’s CFO left the company after being hired in 2015. Then, in early February 2018, Jon Mcneil, then Telsa’s president of global sales and services left the company to join Lyft as its chief operating officer. Just last week it was announced that Eric Branderiz, then Tesla’s Chief Accounting Officer, was leaving the company for personal reasons less than two years after joining the firm.

While speculation can run rampant about possible reasons for leaving, and we certainly hope all is well with Mr. Branderiz, one thing is known. When hired in October 2016, Mr. Branderiz was provided a $5 million equity grant that vested over four years. His abrupt departure leaves a significant portion of this grant unvested. While executive departures are rarely a good sign, they’re especially alarming when an executive is leaving big money on the table.

Production Issues Persist

Tesla continues to experience production delays at its Gigafactory. In late January CNBC reported that the company is still producing certain battery components by hand and has been forced to borrow employees from supplier, Panasonic, as it keeps pushing back its production schedule for the Model 3.

Bloomberg recently built its own Model 3 production tracker to determine how many Model 3s were being built. Using vehicle identification numbers, Bloomberg estimates that Tesla is building approximately 737 Model 3s per week. This estimate falls well below the 2,500 per week goal that Tesla hopes to achieve by the end of March. However, even this 2,500/week goal is a long-time coming. In August 2017, Tesla projected it would produce 5,000 Model 3s per week by the end of 2017. Rather than meeting these goals, a delay and subsequent lowering of goals has become the norm.

Per Figure 1, Tesla has routinely missed its initial and revised production targets since mid 2017.

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