Elon Musk thrives on failing better. His resume is rife with disasters of interstellar proportions — literally. Like Steve Jobs, he was also kicked out of his own company. Yet, many companies and a few rocket explosions later, he still looks at the stars. His tunnel vision powers The Boring Company, SpaceX, and Tesla.
Musk makes science fiction come true.
However, his take-no-prisoners attitude comes with a huge downside, especially manifest on his twitter handle. The rainmaker’s tweets pack the voltage to short-circuit markets. Musk’s recent run-ins with Securities and Exchanges Commission (SEC), is largely a result of his twitter routine.
Musk doesn’t have time for lesser mortals. And, when ‘boneheads’ get in his way, he gets ‘bored’. To that end, he has lashed out at SEC during a CBS interview. “I want to be clear. I do not respect the SEC. I do not respect them,” Musk told CBS’s Lesley Stahl on December 9, 2018.
Lately, Tesla’s second largest stakeholder had cast aspersions on Musk’s compulsive grandstanding and went on to suggest it would make sense for him to let go of the CEO position for the greater good of the company he is a co-founder of.
“We wouldn’t be against him having a different role,” said James Anderson, head of global equities for Ballie Gifford, told Barron’s. “I don’t think he needs to be CEO.”
Edinburgh — based Baillie Gifford owns 7.7% of Tesla’s stock, valued at USD 3.8 billion.
Anderson said Musk should be “enabled to step back from having to feel so driven to comment” in an interview with Bloomberg.
“You can be in the background,” he said. “I can’t remember the last time that Jeff Bezos turned up on a quarterly call, let alone felt the need to talk about analysts, even though I suspect he’s got some quite big thoughts about them.”
Ballie Gifford has stakes in Amazon Inc.
Comes with the territory
Musk is type A and type 2 at the same time — right up Schrodinger’s cat’s alley. Jonathan Tepper, founder of Demotix.com and Variant Perception, tweeted: “Shorts think Elon Musk is a promoter and a fraud. Longs think he’s a brilliant engineer. They think it is either/or. What if he is both like a quantum qubit? A brilliant investor I met suggested this is the most likely possibility.”
In a New York Times article published on August 15, 2018, author James B Stewart sounded out a few Goldwater-proof shrinks to do a differential diagnosis of Musk’s head space. The psychological profile fits the stereotype of a mad genius. But Musk provided the anchoring effect for the piece with tweets touching upon his mental states, his fidgety body language and rapid eye movements.
“The reality is great highs, terrible lows and unrelenting stress. Don’t think people want to hear about the last two,” Musk tweeted.
He has even made overtures on his bipolar tendencies. “Maybe not medically tho. Dunno. Bad feelings correlate to bad events, so maybe real problem is getting carried away in what I sign up for,” Musk quipped.
Musk obsesses over Mission impossible. His high creativity, rocketing ambitions and problem solving skills are consistent with this shadow-diagnosis.
The perfect storm
On September 27, 2018, the SEC charged Elon Musk based on a series of false and misleading statements he published on Twitter about a potential transaction to take Tesla private.
Musk made his stance clear in an email sent to employees on August 7: “First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held,”
The email was published in Tesla’s official blog.
“When companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading and do not omit information a reasonable investor would consider important in making an investment decision,” SEC chairman Jay Clayton said in a statement in September.
The SEC’s complaint alleged that, in truth, Musk had not discussed specific deal terms with any potential financing partners and that he knew the potential transaction was uncertain and subject to numerous contingencies. Musk’s tweets caused Tesla’s stock price to jump by over 6% on August 7 and led to significant market disruption
At approximately 7:15 pm ET on February 19, 2019, Musk published the following statement via Twitter: “Tesla made 0 cars in 2011, but will make around 500k in 2019”
Few hours later, came the corrigendum: Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.
But SEC would have none of it, and has filed a complaint against Elon Musk,to hold him in contempt of court.
Tesla is already beset by production bottlenecks. The most valuable American car company is yet to turn an annual profit. Cash flow issues have also played a hand in the genius move to shift to online-sales only model.
“From our discussions with [traditional automakers] over many years, most auto companies would love to sell vehicles the way Tesla does. There’s just one catch. They can’t. It’s against the law- Morgan Stanley analyst Adam Jonas said in a note to investors.
Tesla is the only [original equipment manufacturer] to our knowledge that is allowed to sell its wares through company owned stores,” Jonas said. “Tesla is now trying to take this a major step further to be the only [automaker] to sell new cars directly to consumers on-line without the involvement of a physical dealer.
“Tesla’s plan may work, Jonas said, as “it’s just so easy to buy a Tesla” through the company’s website.
Musk’s problems are, however, far from over. The rise of rivals, including the German trio (Audi, Mercedes, BMW) and the Chinese upstart, Nio Inc (listed in New York exchange) in the electric vehicle space could spoil Tesla’s party. The window of first mover advantage is fast closing.
In the meantime, 80 odd Tesla employees have quit since January 2019. The stock is in free fall, and a question mark hangs over Musk’s moral side. The timing of Johny Depp’s defamation suit against Amber Heard of late night creeping with Elon Musk is also suspect.