In a surprising move, Tesla Inc. (TSLA) announced that chief technology officer (CTO) J.B. Straubel is heading for the exit. It's a unexpected departure that is raising the question of how big this "key man" risk is for the electric carmaker.
Shares of the electric automaker were down around 14% in mid-morning trading Thursday with a big bottom-line miss that largely is blamed for the slide.
However, some analysts are suggesting Straubel is the bigger story as he is replaced by current Vice President of Technology Drew Baglino.
"In our view, this may be the biggest news of the quarter," Morgan Stanley analyst Adam Jonas wrote to clients following the announcement. "Investors may question what motivated the 15-year Tesla vet to give up direct operational responsibility at this time."
Straubel has been at the center of many of Tesla's key technologies, acquiring more than 30 patents on behalf of the company and spearheading its Gigafactory and battery technology effort that has attempted to make Telsa less reliant on Panasonic (PCRFY) .
In terms of technological prowess, Tesla is losing perhaps its top tech star, with the possible exception of artificial intelligence (AI) head Andrej Karpathy.
But perhaps the bigger concern for investors should extend to corporate culture and the growing unilateral control of CEO Elon Musk.
"Similar to on the 4Q18 earnings conference call in January when it was unexpectedly announced that long-time CFO Deepak Ahuja would be departing the company, it was announced yesterday that long-time CTO J.B. Straubel would also depart," J.P. Morgan analyst Ryan Brinkman said, noting the commonplace nature of high profile exits. "We suspect investors will view the departure of Mr. Straubel as concerning because he had been - along with Mr. Ahuja - to our knowledge the only remaining senior executive besides Mr. Musk that had been with Tesla virtually from the beginning, suggesting he may have served as an important counsel and check against seemingly unilateral decision-making. We also believe that Mr. Straubel may have been one of the few internal candidates for potential succession to the CEO role."
In that sense, the departure could be seen not only as a key visionary departing, but the removal of Elon's current governor and potential heir apparent.
"JB Straubel moving to an advisory position adds to fears of executive fatigue," Jefferies analyst Philippe Houchois suggested.
There also is the fear that Straubel will not be the last big name to bolt from Tesla.
Considering about 30 executives have now left the company in less than two years, the threat of continued turnover in key positions remains a persistent fear, especially as Tesla attempts to create its own semiconductors and win the race to autonomous driving sans so many top engineers.
Straubel's situation is slightly different than the many executives who exited entirely as he slides into an advisory role.
"I'm not disappearing, and I just wanted to make sure that people understand that this was not some, you know, lack of confidence in the company or the team or anything like that," Straubel told analysts on Wednesday evening. "Drew [Baglino] and I have worked closely together for many, many years, and I have total confidence in Drew, and I'm not going anywhere if there's anything I need to do to be helpful to Drew or the whole team or any of the ongoing projects."
Baglino has been at Tesla for nearly 14 years, working side by side with Straubel for much of his time.
Still, after Straubel exercised options to sell a great deal of his Tesla stock holdings in recent months and in another venture to run in Redwood Materials, a recycling company, it is unclear how involved he will be with Baglino.
It will remain to be seen whether Straubel's quasi-role at Tesla can curtail serious losses in Tesla's stock, but the initial reaction isn't encouraging.