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Tesla is ‘better run’ after leadership tumult, says top investor

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Via Financial Times

Tesla is a “better-run” company after its regulatory battles following the recent addition of independent directors to oversee Elon Musk, according to the electric carmaker’s top external shareholder.

“We thought he was getting things wrong,” said James Anderson, head of global equities for Baillie Gifford, speaking about Mr Musk, Tesla’s founder. “I feel more comfortable now.”

The electric carmaker has overhauled its board in recent years, stripping Mr Musk of his chairman role, cutting the number of board seats and hiring independent directors including Larry Ellison, the Oracle founder, and James Murdoch, the media scion.

The bulk of the changes came after a 2018 settlement with the US securities regulator over Mr Musk’s false claim that he had secured funding to take the firm private. Prior to the lawsuit, Glass Lewis, the proxy adviser, and CtW Investment Group, which works with pensions, had also criticised the company for stacking the board with directors who had close ties to Mr Musk.

Mr Anderson said the appointment of Robyn Denholm, one of the company’s independent board members since 2014, as chairwoman was a decisive move. She had given the founder “emotional” support and allowed him to focus on leading the company, he said.

Ms Denholm left a senior role at Telstra, the Australian telecoms company, last year to focus on Tesla full-time and is one of few board members with automotive experience. Last year, she led efforts to cut the number of board seats to seven from 11 after consulting with top Tesla shareholders. Kathleen Wilson-Thompson, a HR executive from Walgreens Boots Alliance, joined alongside Mr Ellison as an independent director in 2018.

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Baillie Gifford first bought shares in Tesla in 2013 and today owns 7.5 per cent of the carmaker, a stake worth $9.7bn. Mr Anderson is co-manager of the £8.2bn Scottish Mortgage Investment Trust, the asset manager’s flagship fund that trades on the FTSE 100, which alone owns $1bn of the company.

The large holding makes the Scottish fund house one of the big winners from Tesla’s recent rally that has added two-thirds to the share price since the start of the year.

Line chart of ($) showing Tesla stock price since Baillie Gifford became shareholder

The Edinburgh-based fund group has stood by Mr Musk through periods of tumult that have attracted the glare of the media. These include smoking marijuana on a radio show broadcast online, describing a UK volunteer who helped rescue boys trapped in a Thai cave as a paedophile and an incessant battle with short sellers betting against Tesla’s stock.

The sparring between Mr Musk and short sellers, including David Einhorn of Greenlight Capital, has become one of the top rivalries in capital markets. The Tesla founder has marshalled an army of supportive retail investors to fight back against the carmaker’s critics across social media.

Mr Anderson has long warned that exchanges with short sellers and other elements of Mr Musk’s public profile could distract the founder from the more mundane tasks of management. “I think that the shorts acquire too much publicity,” Mr Anderson said in an interview ahead of a planned trip to California, where he will speak to Tesla executives.

Mr Musk has also fought with Wall Street analysts on quarterly earnings calls. Last year, he said “bonehead questions are not cool” in response to one analyst query before taking a question from a retail investor. Prioritising “bloggers and supportive analysts” on earnings calls remained a hurdle for company analysis, said Toby Clothier, an analyst at Mirabaud Securities in London.

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“Selective disclosure of news remains a massive problem,” he said. “It doesn’t matter how you change the board if you can’t address many of these basic questions.”

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