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What Exactly is Elon Musk Doing?
By now you know what Elon Musk said he’s thinking about doing: The Tesla founder and CEO took to Twitter on Tuesday to announce that he’s considering taking his company private, shocking investors, Wall Street analysts and pretty much anyone not named Elon Musk.
To be sure, Tesla’s board released a brief statement on Wednesday to clarify that Musk had “opened a discussion with the board about taking the company private” a week before he sent out the stunning tweet. The board added that it is “taking the appropriate next steps to evaluate this.”
We have no reason to doubt the board’s statement confirming that it had discussions with Musk about going private before he sent out the tweet heard ’round the world. It would be extremely egregious of Musk to have made the statement he made without first approaching the board about it.
But that raises two questions: First, why would Musk send out a tweet about his desire to take Tesla private when the board is still evaluating whether it makes sense? Second, even if the board knew Musk was interested in taking the company private, did it actually know he would tweet his desire to take the company private to his 22 million-plus followers before it had finished its evaluation?
Which brings us to a third question: You know what Elon Musk said he’s thinking about doing, but do really know what Elon Musk is doing?
There’s no denying that Musk is a bit of an eccentric; similar to President Trump, you have to accept that he has a certain way of doing business that – while you may not like it – you have to learn to accept it in order to protect your sanity. And like Trump – who uses Twitter as his bully pulpit to attack his adversaries and threaten war with foreign countries – Musk likes to use Twitter to troll his adversaries and, well, let you know he wants to take Tesla private.
As a refresher, here’s what Musk said in a follow-up blog post after his tweet, explaining his reasoning for going private:
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.
The problem with Musk’s logic, as the Wall Street Journal‘s James Mackintosh points out, is that “none of this applies to Tesla.”
It is hard to think of a company that cares less about sucking up to Wall Street than Tesla. Mr. Musk earlier this year rejected “boring bonehead questions” from analysts on his quarterly earnings call; the company offers no guidance on quarterly earnings; and it has frequently and unapologetically reported losses far worse than expected (only twice has it made a quarterly profit, both times a surprise).
And about those “wild swings” in the stock market that Musk complains about? Mackintosh notes the “true value of the company would still swing around wildly, but no one would know.”
And so, with Tesla you have a company that is bleeding a ton of cash, has just laid off 9 percent of its workforce as it struggles to turn a profit, and has met only one production goal – and barely even did that. And now the Securities and Exchange Commission is starting to sniff around after Musk sent out his tweets.
There has always been a cult of personality around Elon Musk; he talks a great game, dreams big, and there is a loyal contingent of people – including Tesla’s shareholders – who truly believe he will one day change the world. And to be fair, in many ways, Musk already has helped change the world – or at least move it forward – as a co-founder of PayPal.
But Musk’s desire to take Tesla private – which may not even be realistic – sounds less like a solution to what he perceives are the market-related problems keeping the company from becoming successful, and more like a way of keeping the company’s failures hidden. No one believes in Elon Musk more than Elon Musk, but unless he begins delivering on the promise of Tesla, people could start saying about him what Gertrude Stein famously said about Oakland, California: There isn’t any there there.
Photo: Getty iStock