Peter Michaelis, Simon Clements and Neil Brown, lead managers of the sustainable equity team at Liontrust Asset Management, who manage more than $3bn across the firm's strategies, have said electric vehicle (EV) manufacturer Tesla remains an attractive investment despite chief executive Elon Musk's "troubling" behaviour.
Speaking to Investment Week, Clements claimed corporate governance and the management team had become Tesla's biggest "issue", but maintained the product was "very strong".
On 27 September, the US Securities and Exchange Commission (SEC) filed a fraud complaint alleging Musk had made "false and misleading statements" when on 7 August he revealed on Twitter plans to take the company private in what would have been one of the largest such deals in history, causing shares to jump 11%.
He tweeted: "[I] am considering taking Tesla private at $420. Funding secured. Basically, I am trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible."
Musk subsequently abandoned the plans to take Tesla private, claiming investors had persuaded him to keep the company listed, but the tweet led to the SEC announcing on 15 August it would investigate the matter. As a result, Musk agreed to step down as chairman for three years and pay a $20m fine, but will remain as chief executive.
Tesla's shares dropped 12% in after-market trading on 27 September following the SEC filing, to 27% below the level they rallied to on the back of Musk's buyout claims. The shares are currently trading at $284, down 3.6%, as at 4 October.
Liontrust's Clements admitted that "Musk has become an issue" and welcomed the moderation of his tweets relating to Tesla.
"It is clear Elon Musk has become too emotionally involved in his personal battle with short sellers in his company, and that has spilled over into behaviour, which is troubling," he said. "We welcome the changes to the governance structure of Tesla, and also welcome some restraint from Elon Musk's activity related to the Tesla business on Twitter."
However, Clements praised the firm's "significant" environmental benefits and Musk's unprecedented success in growing the electric car market.
Clements predicted the firm is close to a turning point due to an improvement in fundamentals and is confident it will maintain its domination of the EV market.
In terms of products, he remained optimistic on Tesla's prospects pointing to the strong brand, loyal customer base and better battery technology than its rivals.
"What seems to have been overlooked is the underlying improvement in the fundamentals of the Tesla business. It is close to experiencing a cash flow inflection, where it begins to build cash on the balance sheet, rather than burnt it. This will be a turning point for the business.