Belief in Elon Musk Is Enough to Continue Driving Tesla Inc Stock

“Quite likely.” That’s how Tesla Inc (NASDAQ:TSLA) CEO Elon Musk assessed the company’s chances of actually meeting its Model 3 production goal, a pace of 5,000 per week, by the end of this month. “Quite likely.” It’s not exactly the song of encouragement those who hold Tesla stock were hoping for at this year’s annual meeting.

The faction of investors that were pushing to replace Musk as chairman of the board for Tesla also went home disappointed. In the end, Musk had the support and the votes he needed to remain in that role as well.

Of course, it didn’t hurt his odds that Musk also holds about 22% of all Tesla stock, and therefore enjoys 22% of the company’s voting power. Bonus (for Musk): It takes 89.5% of shareholders to agree on any major changes anyway.

In other words, nothing’s really changed about this company. It still is a carmaker that’s completely capable of hinting at promises it doesn’t have to (and probably won’t) keep.

Elon Musk Dodges a Bullet

Musk went into this year’s annual meeting of Tesla Inc. investors with a little more resistance than usual.

Though overpromising and underdelivering have become normal and expected, a painfully slow start with getting the new Model 3 made en masse has more than tested the patience of a few too many investors.

Early last year the celebrity CEO said his company would be making 5,000 of the lower-cost electric vehicle by the end of 2017, as of last week Tesla was only cranking them out at a pace of 3,500 per week.

That gives Musk three weeks to pull off a miracle.

And, maybe he’ll do it. It was the proverbial last straw from some shareholders though, who’ve grown weary of never really knowing what to expect.

The root of the problem is mostly seen as the lack of accountability when a company’s chief is also the chairman of the board of directors. Musk is both, which effectively circumvents the accountability matter. And, to the extent it doesn’t, the fact that Elon’s brother as well as a couple of other hand-picked allies are also on the board makes it unlikely Elon’s going anywhere.

One of the owners of Tesla stock had submitted a proposal to split the two roles up as well as replace some board members not so loyal to Musk. And, proxy advisers Institutional Shareholder Services and Glass Lewis, along with pension management specialist CtW Investment Group, all supported the measure as well.

An emotionally-charged speech about the company’s love for the cars it makes, however, erased any doubts that a structural shakeup was necessary.

Tesla Stock Has a Problem

In the short run, keeping things as they are is the best move. It’s unlikely there’s anyone in the world more capable of getting Tesla Inc. to a pace of 5000 Model 3 vehicles a week than Musk is right now. He essentially has been living at the production plant. It could take weeks if not months for an outsider to navigate the learning curve Musk has traversed since early last year.

Make no mistake though, getting to a point where the company can consistently manufacture 5,000 of the electric car feels more like three months’ worth of work rather than three weeks’ worth.

There was some progress made, however, that came to light during the Q&A portion of the annual meeting. Musk conceded of his penchant for overestimating how quickly the company can move “I’d probably put some sandbag on future dates, that’s probably wise. I kind of say when I think it can occur, but then I’m typically optimistic about these things.”

Acknowledging you have a problem is the first step to solving the problem. Somehow though, this particular catharsis seems like it’s going to go no further than the confession.

That’s the indirect way of saying don’t look for Musk to serve up more realistic timeframes with future projects and milestones.

Bottom Line for Tesla Stock

Not that the market has a problem with any of it; not really. Tesla stock popped about 5% higher on Wednesday, with investors celebrating that Musk was still firmly in charge.

For better or worse, the market seems to like his bombastic expectations, tacitly knowing the company won’t move nearly as quickly as superficially suggested. It’s all just part of the game nobody wants to admit they’re playing.

Of course, who can blame them? Playing the game seems to have worked out quite well for everyone who’s playing it.

Whatever the case, with no changes in the way the company’s oversight is structured (indeed, with that structure decidedly endorsed) and in light of the fact that Musk is a grown man and is simply unlikely to change his ways now, don’t think for a minute the Model 3 timeline will be the last broken promise Tesla shareholders suffer.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.

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