Tesla has had a rough month. Opening at $350.60 on October 16th and closing at $308.70 On November 14th, the recent performance of the electric vehicle giant has a lot of analysts scrambling.
The past few months have been nothing but bad news from the tech company, from industry-related skepticism to — most damaging — yet another recently launched lawsuit. But what does it all mean for the world’s most popular electric car company? Is the company itself still sound, or is it pulling apart at the seams?
Allegations: “Hotbed for Racist Behavior”
A recent lawsuit against Tesla alleges that the factory is a “hotbed for racist behavior.” This class-action lawsuit claims that not only were there racial slurs used in the factory, but that the management of Tesla did not resolve the situation.
Over 100 black employees are included in the suit, which was brought by a former worker by the name of Marcus Vaughn. Marcus Vaughn has stated that not only were his complaints not addressed, but he was also fired in October for not having a positive enough attitude.
Not the First Lawsuit — and Probably Not the Last
Most companies experience a litany of lawsuits, but Tesla is notable for having quite a few high profile complaints in a relatively short amount of time. All of these complaints are related to harassment and discrimination in their factories… and all of them have arisen just this year.
These complaints included:
Sexual Harassment
Earlier in 2017, Tesla was sued by a former engineer claiming sexual harassment. This lawsuit entered into court-ordered arbitration. AJ Vandermeyden claimed that not only were her complaints of sexual harassment ignored, but that she was also paid less than the men that were her peers. Tesla countered that the engineer had received special treatment and that her claims were illegitimate.
LGBT Discrimination
An employee by the name of Jorge Ferro complained that he was harassed, not only with remarks about being gay but also threats such as “watch your back.” After a second complaint, Ferro was dismissed, reportedly for being injured. Ferro states that an HR manager told him that there was “no place for handicapped people at Tesla.” This ultimately led to a wrongful termination lawsuit.
Suppressing Unionization
After a mass wave of layoffs, it was alleged that the layoffs had been intended to quell union activity. Though Tesla stated that these layoffs were based on performance, employees claimed that the company had dismissed many employees without pointing out any performance-related issues. This layoff may have included anywhere from 400 to 700 employees, and while the layoffs themselves may have been performance based, a layoff of that size was also a concern.
Large volumes of lawsuits and complaints, as we have seen with Uber, often indicate a failing of upper management and a failing of overall corporate structure and corporate culture. On the other hand, a company that has over 10,000 employees will also experience a number of lawsuits, and Tesla in particular is often under a microscope regarding its activity.
Moving Forward: What’s Next for Tesla?
Tesla’s stock isn’t falling solely due to complaints and lawsuits. The company itself is experiencing issues with profitability, in part due to issues with their vehicle production.
Some of these issues with revenue are obscured by Tesla’s SolarCity, which is generally included in the reporting for its automobile manufacture. Some analysts additionally believe that demand for Tesla’s vehicles may very well be capped, making it more difficult for Tesla to continue its growth. This may be in large part due to Tesla’s positioning as an electric vehicle available at a luxury price point. If these analysts are correct, Tesla may actually continue to fall in valuation, as it may not be able to produce a solid earnings report for some time.
It’s impossible to anticipate how the Tesla lawsuit will go, and that’s where there’s a lot of opportunity for speculation. Those who firmly believe in Tesla’s fundamentals, however, should not be dissuaded; a dip in valuation can actually be a good time to get in, assuming that the company will rebound and recover on the merits of its business initiatives. However, those who believe that there may be more problems than Tesla’s let on — or that Tesla may be losing its focus — may see this as the very first cracks showing. As with many things, only time will tell.
Regards,
Ethan Warrick
Editor
Wealth Authority
