First it was the shocking tweet that funding was secured and Tesla may go private, then a statement that the money wasn’t locked down after all.
Two weeks later it’s never mind, the whole deal is off.
Welcome to the disarray of Elon Musk, the impulsive genius and architect of cutting-edge car, rocket and solar panel companies built nearly from scratch.
Chaos, though, comes with a price.
Experts say it all could wind up with Tesla exposed to a fine for misleading investors. And even though Musk has almost legendary status, the episode could further erode his credibility with stakeholders who have endured multiple broken promises and years of losses as a public company.
The erratic behavior of Tesla CEO Elon Musk (pictured in June) in recent months has led experts to call for the company’s board to evaluate his position within the organization
‘Prior to the go-private episode, his credibility was in question, although investors still had overall confidence in the guy,’ Erik Gordon, a business and law professor at the University of Michigan, said Saturday.
‘This whole go-private episode has taken his credibility close to zero.’
The bizarre story began August 7 when Musk, while driving to the airport, tweeted he was considering taking the company private and that funding had been secured for the deal.
Investors would be paid $420 per share, a 23 percent premium over the August 6 closing price. No other details were given, but Tesla’s stock shot up 11 percent that day. At $420, buying all Tesla shares would cost around $72billion.
Then, in a blog post six days later, Musk wrote the money wasn’t locked down, revealing that Saudi Arabia’s Public Investment Fund was the source of the cash but was still doing due diligence.
Musk said the Tesla board and some big investors had been told he was considering taking the company private before he tweeted that information. He said he tweeted the disclosure so everyone could have the information.
Musk, who owns 20 percent of Tesla, also said he expected only a third of shareholders to sell, meaning the deal would be valued around $24billion.
Musk announced he was considering taking the electric car company private on August 7
He said shareholders could sell or hold onto their shares and go private with Tesla. The announcement was met with a lot of push-back
‘My hope is all current investors remain with Tesla even if we’re private,’ he tweeted. Musk said on Friday that after speaking with investors the best thing to do was remain a public company
Late Friday came a statement from Musk saying that after talking to investors, the plan to go private would be scrubbed. Big institutional investors told him they had limits on how much they could sink into a private company.
The episode drew attention from the US Securities and Exchange Commission, which reportedly is investigating Tesla for possible manipulation of the stock price.
At least two lawsuits seeking class-action status also have been filed alleging Musk broke securities laws by making it sound like financing for the buyout was lined up.
James Cox, a Duke University professor who specializes in corporate governance and securities law, said regulations prohibit companies from making misleading statements that influence the markets.
‘The fact that he’s now backing off so quickly, within a matter of weeks, indicates the insincerity in which the first statement was made,’ Cox said.
While Musk disclosed the possible buy-back on August 7, he didn’t reveal all contingencies including that the Saudi fund had to investigate, said Peter Henning, a Wayne State University law professor and former SEC attorney.
‘I think his most recent statement shows that this wasn’t thought through,’ Henning said. ‘That’s going to be a concern for the SEC because that’s how investors can be misled, with incomplete information.’
The SEC also is likely to look at Musk’s disclosure to some investors before others, which also is prohibited if there’s reason to believe the investors might trade stock based on the information, Cox said.
Calling the whole thing off, though, might also be a defense for Musk, according to Henning.
‘He could say I was just testing the waters. I was just thinking out loud, so I didn’t mean to mislead anyone on this,’ he said.
Normally, if a company was mulling a plan to go private, the CEO would notify the board and a process would be put in place to evaluate the move, Henning says. Lawyers would be involved and it would be disclosed in a filing with the SEC.
Cox predicts that Tesla will settle with the SEC, pay a penalty and agree not to violate securities laws in the future.
Tesla declined comment Saturday. Six board members said in a statement Friday night that the board supports Musk and Tesla
On top of all this drama, last week Musk disclosed in an interview with the New York Times that he was stressed out from trying to meet long-delayed production targets for the Model 3 mass-market electric car. He said he was working 120 hours a week and had to take Ambien to sleep.
Investors stuck with the company, although since the run-up on August 7 shares have retreated. They closed Friday at $322.82, six percent below the opening price the day of the tweet.
Tesla declined comment Saturday. Six board members said in a statement Friday night that the board supports Musk and Tesla.
Some bullish investors still say Tesla has great growth potential. Shareholder ARK Invest recently wrote to Musk urging him to keep the company public and saying that $420 per share is too low.
But Consumer Edge analyst Jamie Albertine, who had been a Tesla optimist, cut his rating on the company and urged the board to bring on a seasoned executive to help manage it.
On Saturday Albertine said that while second-quarter earnings indicated positive trends, the events of the past few weeks are ‘enough to make us uncomfortable’.
‘It’s a s**t show’: Angry Tesla insiders blast erratic Elon Musk
Elon Musk may appear in crisis to outsiders with his incendiary tweets and public meltdowns – but his staff say it’s even worse inside Tesla.
Employees said the under-pressure billionaire sets unrealistic goals on a whim and constantly shifts sales targets – all while expecting staff to feel sorry for him.
The company was described as being ‘in turmoil’ as Musk lurches from one self-inflicted drama to another and investors fret about Tesla’s future.
‘Elon talks about being a socialist and doing good for mankind – unless you work for them. It’s a s**t show,’ one insider told the New York Post.
The enigmatic figure would often make far-fetched promises about upcoming features in Tesla’s cars, and refuse to walk it back when told they aren’t doable.
‘He’ll say ‘the car can do X, Y or Z’ and yes, that is possible – two decades from now. He bases his argument on the physically possible rather than the practical reality,’ one worker said.
Employees said under-pressure Elon Musk sets unrealistic goals on a whim and constantly shifts sales targets – all while expecting staff to feel sorry for him
Musk was even said to demand new functionality on his cars based on fans asking when they would be available, then tweet back a date regardless of practicality.
Sales staff were equally frustrated after leaving high-paying jobs for the promise of huge commissions at Tesla that have not materialized.
A salesman who left a $150,000 job for one at Tesla with a $34,000 base salary said staff rarely get their commissions because the company changes the targets.
He described how a co-worker had a great year and was expecting a $42,000 commission, only to be told she missed the target and would only get $4,000.
There were persistent problems with the cars, too, as a Business Insider report revealed 4,300 of the 5,000 Model 3s made in June needed substantial fixes.
That meant only 14 percent of the cars left the production line without needing fixes – compared to 80 percent at most other companies.
Elon talks about being a socialist and doing good for mankind – unless you work for them. It’s a s**t show.’
The cars had ‘inconsistent gaps and flushness throughout the car, missing bolts, loose tolerances, and uneven and misaligned spot welds’, investors said.
‘The results confirm media reports of quality issues and are disappointing for a $49k car.’
Staff told the Post many of the Model 3s came into the showroom scratched or damaged with mismatched panels that didn’t line up properly.
Then on Thursday a fire started at Tesla’s Freemont, California, factory which began in a cardboard pile and threatened buildings until it was put out.
‘I was just there. Cardboard being prepped for recycling along southern fence line caught fire. Super appreciate fast response by Fremont fire dept! No injuries or damage to factory,’ Musk tweeted.
The ‘turmoil’ has resulted in, and been exacerbated by, an exodus of senior staff who were sick of how the company was being run.
Corporate treasurer and VP of finance Susan Repo left after five years, sales chief Jon McNeill defected to Lyft, and chief accounting officer Eric Branderiz quit for personal reasons – all in March.
The in July, chief engineer Doug Field and top sales executive Ganesh Srivats jumped ship.
Even with Tesla’s woes and Musk’s increasingly unhinged public persona, employees said they were still expected to treat him as a messianic figure.
Company sources described staff meetings reminiscent of an infamous meeting of President Donald Trump’s cabinet where they went around the table showering him with praise and thanking him for choosing them.
More recently, a salesperson said corporate ‘literally sent out a picture of the couch and blanket that he sleeps on’ at the Tesla factory.
‘They were selling it to us like his team pitched in to buy him a new couch. He’s a f**king billionaire. He can afford a couch,’ they said.
But despite widespread unrest, staff still want the company to succeed – if only so they still have jobs.
‘Everyone realizes it’s f**ked up, but everyone’s afraid of losing their job before Tesla ‘hits it big’. It’s a mess,’ one said.
Employees also speculated that Musk’s incendiary tweets were, at least in part, meant to distract from any bad news at Tesla.
Reporting by Nic White for MailOnline