Buried among the fanfare of a profitless fourth quarter from Tesla (NASDAQ:TSLA) is the most important announcement, one not made in the annual update letter but rather as a one sentence send-off in the conference call: Jason Wheeler, Tesla's CFO, is leaving to pursue a "public policy" position. Sound familiar? It should, considering seven executives (that I know of) left the company last year. What makes the departure even more astonishing is that Wheeler only spent 15 months at the company, his addition being announced in November of 2015.
Perhaps more concerning, however, is his replacement: Deepak Ahuja, i.e. the CFO Wheeler was brought on to replace in the first place. There is little debate possible about how great of a step-down this is: Ahuja was hired away from a board directorship at FireEye, and before his previous stint at Tesla was a Product Development Controller at Ford. This contrasts starkly with the success that Wheeler found at Google, where he spent 13 years as VP of Finance.
A few thoughts immediately arise:
- Wheeler was roundly lauded as the right fit for Tesla when he was poached from one of the "big boys" (Google), demonstrating Tesla's ability to acquire talent on par with any of the Silicon Valley giants. The fact that Tesla would have to go back to their longest tenured CFO in Ahuja and were unable to woo a desirable suitor (someone in the mold of Wheeler) should be alarming for bulls. Tesla, one of the sexiest Silicon Valley names, should have no trouble finding solid executives to bring on board, and the fact that they are should speak volumes about the distance that finance guys want to keep between themselves and Tesla.
- Fifteen months is incredibly short to spend at a company, even at one that is so demanding it's like "working in the special forces." The fact that the overseer of the company's finances would bail after barely a year should be a warning sign that something isn't copasetic with Tesla's financial situation. Indeed, it's one thing to look at the company's financial reports and projections to deduce whether the company will continue as a going concern in the next few years. It's quite another to have the CFO who has infinitely more information look at the companies finances, try to fix them for a year, and then scurry off.
- One wonders at the timing of this departure in the context of Tesla's operations - why now? Things seem to be progressing mostly as predicted: the company continues to burn cash while ramping Model 3 capital expenditures. Nothing much seems to have changed during the past quarter...except the merger with SolarCity. It could, of course, be coincidence that Wheeler has decided to leave after a few months of marital bliss between Tesla and SolarCity. On the other hand, it could, of course, be that things are much less rosy with the financials of SolarCity than we're being led to believe. If anyone has the information and capability to untangle the notoriously impenetrable accounting of SolarCity, Wheeler would be that individual. The fact that he is leaving the company after the first merged quarter with SolarCity is, at the very least, very curious.
Generally, it's a bad sign when company executives depart. Legendary short seller Jim Chanos uses it as a key marker of a failing company. It's a worse sign when the CFO leaves. And it's positively terrible when that CFO left after merely 15 months on the job. Of course, this development has gotten short shrift from the Musk devotees in the financial media at large (for instance, Bloomberg's summary of 2016 earnings claims that the model 3 "overshadows" the departure of Wheeler), but the signs continue to build apace with Tesla's total liabilities: the financial situation at Tesla is precarious, with little visibility on when it might improve.
Disclosure: I am/we are short TSLA BY OPTIONS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.