Reports of Elon Musk partying and doing drugs may make investors uncomfortable, but it's a distraction from execution issues at the company, Tesla investor Ross Gerber says

• Elon Musk's reported drug use with Tesla board members is a distraction, Ross Gerber said.
• The long-time Tesla investor pointed to deeper execution issues he sees at the carmaker.

Reports that Elon Musk partied and did drugs with Tesla board members could be making investors uncomfortable — but all that is ultimately a distraction from deeper execution issues at the company, long-time Tesla shareholder Ross Gerber said.

The Gerber Kawasaki Wealth and Investment Management CEO pointed to a recent Wall Street Journal report that claimed Elon Musk had used drugs with executives at his companies. Directors felt there was an "expectation" to use drugs with Musk in order to avoid upsetting him, people who were familiar with the drug use told the Journal.

People who witnessed the drug use said Musk had used drugs with Antonio Gracias and Steve Jurvetson, two former Tesla board members, as well as Kimbal Musk, Elon's brother and current Tesla board member, the report said.

Those allegations are likely a deterrent to institutional investors, Gerber said, adding it was "bad enough" when Musk infamously took a hit of marijuana on Joe Rogan's podcast in 2018.

"People want to have confidence in a board of directors in a company," Gerber said in an interview with CNBC on Monday. "It's really hard to get institutions to invest billions of dollars in a company when the CEO sort of admits to doing psychedelics."

Musk has denied a previous report from the Journal that claimed he used drugs, including LSD, cocaine, and ecstasy. Drug tests mandated by NASA found that he was completely clean, Musk claimed.

But all this noise takes away from a bigger issue at Tesl, Gerber says, which is the fact that the car company has plenty of work to do on initiatives it has promised investors progress on.

The stock is down about 25% year-to-date, falling out of line with the rest of the so-called Magnificent Seven, which have still outperformed the broader market in 2024. One analyst described the company's fourth-quarter earnings call in January as a "train wreck."

"Quite frankly this is all a big distraction from the fact that Tesla needs to execute, and sell Cybertrucks, and get full self-driving to work," Gerber said, drawing from a list he posted on X of ten things Tesla still needs to do. "I'm not that concerned about Elon's personal time and whatever, what I'm concerned about is he's not at Tesla building trucks."

Gerber said that Tesla should axe three to four existing board members and replace them with people who have no ties to Musk. Previously, Gerber criticized Musk for his close circle of Tesla executives, which is made up of members of his family and "all his friends."

"This is the trickiest part for Tesla, because essentially anything the board does — compensation, or major decisions — could be challenged now by investors because Delaware said the board isn't independent," Gerber said, referring to a recent Delaware court ruling that struck Musk's $55 billion Tesla pay package.

But it will be hard to get Musk and his close circle to get on board with that idea, Gerber added, drawing from his experience when he ran for a seat on Tesla's board last year.

"There's no desire from anybody at Tesla or within Elon's circle to have an independent board. Elon controls the company 100%," he said. "It's going to be very hard for the company to move forward with the current board, and this is I think one of the reasons the stock is selling off."

Tesla did not immediately respond to Business Insider's request for comment.

Tesla stock slid over 3% on Monday, slipping to around $181 a share. The stock recovered 2% Tuesday morning. Shares are still down 26% from levels at the start of the year.