Tesla shares fall as Musk's 'America Party' riles investors
"This is exactly the kind of thing a board of directors would curtail - removing the CEO if he refused to curtail these kinds of activities," said Ann Lipton, a professor at the University of Colorado Law School and an expert in business law.
The company's shares and its future are seen as inextricably tied to Musk. He is Tesla's single largest shareholder, according to LSEG data.
His stake should ideally not impact the board's ability to look for potential replacements as it can choose to remove and appoint CEOs without putting in a shareholder vote, said Xu Jiang, a professor of business administration at Duke University's Fuqua School of Business.
But such a move is highly unlikely considering the board has often defended Musk.
Chair Denholm, handpicked by Musk, supported his record-breaking $56 billion compensation that was set in 2018, but it was rejected by a Delaware judge in January last year.
"The Tesla board has been fairly supine; they have not, at least not in any demonstrable way, taken any action to force Musk to limit his outside ventures, and it's difficult to imagine they would begin now," Lipton said.
Shares of smaller competitors such as Rivian and Lucid also fell about 3.5%.
Tesla's shares act as a barometer for the entire EV sector, with their movements swiftly echoed by other EV stocks.
"Tesla is the umbrella stock for the EV space. Generally, EV stocks price up into the Tesla valuation," said Craig Irwin, analyst at Roth MKM.
"The EV tax credit subsidy will now expire at the end of September, versus at the end of 2032. This will likely lead to lower near-term EV sales and affect all automakers who sell EVs," said Seth Goldstein, analyst at Morningstar.
(Reporting by Joel Jose and Arsheeya Bajwa in Bengaluru and Amanda Cooper in London; additional reporting by Medha Singh and Kritika Lamba in Bengaluru and Suzanne McGee in New York; Editing by Saumyadeb Chakrabarty and Arun Koyyur)
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