Tesla Motors (TSLA -8.78%) makes some rather remarkable vehicles. Its Model S is the highest rated car ever by Consumer Reports. But just because its products are good, doesn't mean that the stock is. That's why we're taking a deep dive, trying to figure out the ins and outs of the business.
To start from the beginning, go to "Tesla Motors Deep Dive: Part I", or to see what hidden risks may be lying in wait in the non-GAAP earnings releases, head to "Tesla Motors Deep Dive Part II: Understanding Profits".
In this third part, I want to take a look at the company's leadership and its possible effects on Tesla's stock price.
One huge shareholder you should be aware of
For those of you that only think of Elon Musk only as the company's chief executive, don't forget that he's a shareholder, and a rather large shareholder at that. As of the latest SEC filing, Musk owns over 35 million shares (including 6.7 million shares via options), comprising 27% of the company's current outstanding share count.
Of course, this can either be viewed as good or bad. On the plus side, when Musk holds 27% of the stock, it can keep downside pressure off the share price and give shareholders a great ally over the long term.
On the down side, if Musk were to ever sell, this could create immense downside pressure on the stock. Furthermore, the sell-off could escalate quickly if more investors began to follow his lead, as it could appear that Musk no longer believes in Telsa's future the way he once did.
However, rest assured that his investment in the company may perhaps live longer than he will, as he said, "I will be the last one to sell shares."
Musk doesn't just bring cash to the table
Having a CEO who has a large position in the company is certainly comforting. After all, what else says I believe more than having some skin in the game -- and by "some skin," I mean a lot, in the case of Musk.
But that's not all Musk brings to the table; he brings brains, too. Musk is obviously a smart guy. He has found a way to make electric cars go from lame and short-range to sexy and long-range. He added the Supercharger network as a way for customers to feel less "range anxiety" when going on longer trips, and is attempting to build the Gigafactory for mass battery production, (more about the Supercharger network and Gigafactory can be read in Part I, linked at the top).
Before Tesla, Musk was the co-founder of PayPal (which was later bought and is currently owned by eBay). Along with being the co-founder, CEO, and product architect of Tesla, he is also the CEO, CTO, and co-founder of SpaceX, which "designs, manufactures and launches advanced rockets and spacecraft." Musk is also the chairman of the board for SolarCity.
So why does any of this matter? This isn't to showcase how great or how successful Musk has been. It's to show that he's a game-changer. He creates these incredible products that lead the way into tomorrow's way of life.
Double-edged sword
Of course, having one man as the sole leader in a company is great until something happens. Musk, as we've realized, is the top shareholder, leader, innovator and spokesman for Tesla Motors.
Without Musk, there very well could be no Tesla. So what if something happens? What if he leaves?
While I would never skip out on an investment purely because some unforeseen catastrophe might happen to its influential leader, it is something for investors to consider.
However, in the question of whether or not he will leave, it's not something I would worry too much about. Musk recently stated that he will stay with Tesla for awhile, or in his words, "four or five years, then it's TBD after that."
Final thoughts
While it's important to consider Tesla in a world without Musk, it's not a sole reason to forego an investment in the stock. Coupled with his commitment to both his stock position and his role in the company, Tesla bulls can rest in comfort knowing that the man who started the company doesn't plan to go anywhere.
If Telsa should fail, he is willing to sink with the ship. These are qualities in a CEO that investors like to see. As an investment, Tesla passes with flying colors when it comes to its leadership, provided by Musk.