Tesla is a 'great company,' but 'mismanaged': Investor

Shares of Tesla (TSLA) continue to slide as the company once again asked shareholders to approve CEO Elon Musk's $56 billion pay package that was originally struck down by a Delaware judge. The judge involved in the case called the pay package excessive and said the company's board failed to justify it. The compensation includes no salary or cash bonus but instead stock options that are issued based on performance threshold.

Gerber Kawasaki CEO Ross Gerber joins Market Domination Overtime to discuss the situation with Tesla and Musk and why he is "grateful" to have sold the stock in recent months.

Gerber gives his full thoughts over the company and the position he has taken: "We trimmed Tesla down to a reasonable position, about a 2% position in our firm and in my fund. I love the company. I want to make it clear, the products are amazing. It's a great company with great employees and I just think it's being mismanaged at this point. And it -- you know, I think their strategies are not working. So we've lowered our position, I hope I don't end up selling out of this position because I do think the long-term for Tesla could be amazing if it had the focus of a full-time CEO."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Nicholas Jacobino

Video Transcript

- Ross, I want to switch gears here to another company. You have strong thoughts on that. It would be Tesla. Shareholders are going to be able to vote again on Musk pay package. What do you think's going to happen there?

ROSS GERBER: Well, I think the same thing is going to happen. I don't think the issue was whether shareholders approve this or not. Shareholders had approved it before and probably will approve it again. The issue is, the board of directors never negotiated with Elon, and it seems like when you read the proxy that there was no negotiation about this either. Elon said, well, we're going to put this package back up, and then we're going to move to Texas. So they can't take it away. And it's this kind of thinking where the board is just basically the dog getting walked on the leash or whatever. It's just not the way companies are supposed to be run. So I suspect that even if it gets approved, they'll get sued again.

- Are you-- I mean, you guys are shareholders. Are you going to vote for this stuff.

ROSS GERBER: I've been thinking about it because I did vote for it before, and now I feel like the CEO of the company should be working at that company pretty much every day, if not every day. And so I think in seeing his performance since he bought Twitter, I would require in this pay package that he come back to work at Tesla full time. But I would vote for it if that was the case. But if he's going to keep working at Twitter every day, I don't see why like he's even CEO.

- But they're not changing it. Are they? Isn't it exactly the same--

ROSS GERBER: Yeah, it's the same thing, and that's why I'm saying it's stupid because, even if people approve it, it'll get sued again, and then they're back in court. And moving to Texas, I don't think necessarily solves that problem because Texas is trying to run their state as a shareholder-friendly state to attract business, and just because Elon is a big employer there doesn't mean he's going to get the judge he likes. You know what I mean? So I think the issue is the board of directors of Tesla. It has to have independent directors. It's just required by law, and until they do this, anything the board does can be invalidated.

- Do you think they will reincorporate to Texas, though? How do you think that vote goes?

ROSS GERBER: I mean, once again, it really just depends on Vanguard, State Street, and the major index funds and Glass Lewis, and what they tell these funds to vote. So 15% to 20% of Tesla is owned by three passive index funds. So whatever they choose really is where it will go.

- Ross, you were adding to ASML as the stock goes down. Are you adding to Tesla as the stock has gone down?

ROSS GERBER: No, it's the opposite. We've been Sellers of Tesla over the last six months, and I'm so grateful we did it. If you really chart my fund, GK, versus Tesla, which was our top holding substantially by a large amount up until, let's say, November with the antisemetic tweets was when we started lowering our position, and thank God we have, because we've outperformed Tesla this year by something like 50% differential, and if we would have kept Tesla where was, it would have been a dismal year for us.

So I'm really grateful we took the moves that. We've trimmed Tesla down to a reasonable position. It's about a 2% position in our firm and in my fund. I love the company. I just want to make it clear, the products are amazing. It's a great company with great employees, and I just think it's being mismanaged at this point, and I think their strategies are not working. So we've lowered our position. I hope I don't end up selling out of this position because I do think the long-term for Tesla could be amazing if it had the focus of a full-time CEO.

- So you're trimming Tesla, Ross. Are you putting more money to work in other EV makers?

ROSS GERBER: No, it's the opposite. I mean, if Tesla keeps lowering prices and puts so much pressure on everybody else, and even though I love Rivian, and I've loved Polestar in the past, it's really hard to compete when Tesla keeps lowering prices because they're such great vehicles. So they've actually hurt the industry.

Ironically, Tesla's goal was to advance sustainable transportation and energy, and now it's actually helping push it back because of the problems that have been created by Elon, and it's really sad to me. So I don't think, and I have my whole-- Biden administration hasn't done well by clean energy. It hurt our investors. We've had to get out of solar. We've got out of pretty much all our EV makers, and we have a low position in Tesla, and we redeployed all those assets into AI-relating themes and companies that we feel will add tons of value over the next period of time, and that's been a great trade for us sadly because I'm a big believer in investing for improving the environment.

- Ross, good to catch up with you as always. Thanks a lot.

ROSS GERBER: Yeah, thanks for having me.