Tesla’s Accounting Inconsistencies and Management Turnover

During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Clapham discussed Tesla’s Accounting Inconsistencies and Management Turnover. Here’s an excerpt from the episode:

Tobias: Steve, talking of indecipherable accounts, how do you feel about Tesla?

Steve: Oh, [Jake laughs] people always used to ask me about Tesla. Look, the accounts, when I looked at it, every quarter I picked up, the accounts were prepared in a different set of accounting policies. Not every quarter. There was not a great deal of– How do I put this? There was not the usual normal consistency of preparation that you would expect from a major public company.

Tobias: They did have a few CFOs one after the other there for a little while. But they seemed to have settled down into one.

Steve: The number of management changes, there was a deck going round which listed, I think, about 120 changes at not board level, but executive level one, level two. There’s an unbelievable amount of changes. And normally, I get very concerned about management changes because one of the Greensill companies– When we originally identified that Greensill looked like a fraud, one of the things was that there had been a fairly reputable finance director had been the finance director of a FTSE 100 companies had gone on the board as a non-exec and had left a month later. You think, well, that is not normal. And the most likely explanation of that is she’s gone in and she’s thought, “Christ, I don’t want to be associated with this. I’m gone.”

Now I’ve got no knowledge about why there was all the turnover. I’m sure that Mr. Musk is a very demanding boss and not everybody’s up to it. Some people don’t want to be up to it. But it can’t be a good thing, because if we think about very enduring, successful companies, they tend to have very limited amount of management turnover. I don’t know, what the management turnover at Berkshire Hathaway is, but quite low.

Jake: It’s pretty low at the top. [laughs]

Steve: That gives you a consistency that is very valuable, because those people have got a knowledge history that is actually incredibly important to understanding the culture of the business. And turnover is, by definition, I think, something, as investors, you should worry about. So, the Tesla accounts, I find them quite difficult.

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