There is a reason that Jim Chanos, in several articles talking about his methods for short selling, states that he routinely looks for companies who lose executives in droves. We want to lay out why this is, and we want to talk about why this continues to be a red flag for Tesla (NASDAQ:TSLA) as we see it going forward.

Public company executives have a very good gig. Most public company senior level executives are paid handsomely in both cash and stock and are reluctant to leave positions that are lucrative, regardless of how the company is performing. This is why we have so many companies with terrible management that remain in power for too long. They become chummy with the Board of Directors, and it’s one big happy family of benefiting from shareholders money and not really having to produce results.

Naturally, the inclination for most public company executives is to stay in power and continue to be rewarded handsomely for being the boss. The exception to this rule is long standing executive titans who have made their mark on the industry and who are simply looking to retire, like Macy’s (NYSE:M) CEO Terry Lundgren.

Logic tells us that if it is the default for executives to want to remain at public companies, many of them leaving all at the same time is an indication that the “gravy train” may be running dry. It can also be an indication of a poor tone at the top or abusive leadership.

Executives leaving is similar to insiders buying/selling stock. People in good positions generally only do it for one reason.

Insiders only usually sell stock when they absolutely positively believe that the company is being valued at or above where it is supposed to be valued and they do not think shares can appreciate further. Sure, there are exceptions for the occasional executive that wants to buy a house or make a quick few bucks selling stock. But most executives will not sell stock if they think that the company still has a meaningful runway ahead of it in terms of equity value appreciating. Conversely, executives generally buy in large quantities on the open market when they know the company has a good chance of outperforming in the future.

It is this type of logic that we can apply to executives leaving any public company, especially a “groundbreaking” young and aggressively growing one. Executives simply just do not leave unless there is a good reason, and executives do not leave in full force, one after the other, unless there is a consistent issue.

With that, yesterday, we learned that another executive at Tesla has left the company. Street Insider reported,

Facebook (Nasdaq: FB) is said to have hired a top executive from Tesla to work at its research lab.

Bloomberg noted Wednesday morning that Rich Heley will join Facebook from Tesla, where he was recently VP of product technology for the company. Heley will work in Facebook’s Building 8 research lab.

Heley is likely to work on hardware projects for Facebook following recent commentary by CEO Mark Zuckerberg, which highlighted the social media giant’s efforts to expand its hardware role. Building 8 operates separately from the Oculus VR facility.

Those that have been following the Tesla story over the last year know that there has been a large constituency of individuals who have left their executive posts at Tesla rather abruptly. Executives of the company’s Chinese division left before we found out that Chinese sales were disappointing, and other executives left in the months following. As we have watched executives leave, we have watched corporate governance decisions get more and more aggressive, culminating in the company’s recent decision to try and acquire SolarCity (NASDAQ:SCTY).

We highlighted executive departures in our March 2016 article. In the same article, we predicted the company’s recent $2 billion equity raise when the company continued to say it wasn’t happening,

When we last looked at executive departures, we looked at one of Tesla’s key China executives leaving the company and we questioned the reasoning behind it. What we found out days later was that the company’s performance in China was missing the mark, and so we had what we believed to be a far more common sense explanation as to why this executive may have left.

Following the CFO’s departure thereafter, the company posted a lackluster quarter.

What could the departure of the VP of Finance and top spokesman mean?

When the company’s CFO stepped down, we issued an article which was attacked by Tesla bulls as lacking substance and objectivity. What we have seen then from that point is a company that has come out and said that they are not going to need cash when most analyses have arrived at the conclusion that they will need cash.

We have been saying for months the company is going to need cash and a recent SA article out over the weekend prognosticates a $2 billion equity offering this spring.

If it walks like a duck and talks like a duck, it is probably a duck.

In the case of Tesla, if it walks like an executive exodus and it talks like an executive exodus, something is likely wrong at the company that is preventing it from retaining employees.

Tesla is not a company we want to be long right now.

We do not want to make unfounded speculations and we certainly will not make allegations without evidence, but the one fact that is in evidence that we cannot ignore is that executives at a high-level have left the company in large order over the last year.

At the same time, the company has made its most questionable governance decisions and has failed to meet its sales numbers.

At what point do we ask publicly, “Why don’t employees like working for Tesla?” We remain skeptical of Tesla and may initiate a short position at any time.