- Musk’s obsession with fighting Tesla’s short-sellers nearly cost the company big-time.
- Management experts warn Tesla to be wary of similar outbursts from Musk in the future.
- Musk’s plan to go private was as much about dinging Tesla’s short-sellers as it was putting the company on a firm footing.
Elon Musk’s long-time feud with Tesla’s critics played a major role in the tech billionaire’s desire to take the automaker private, but it also dealt a near fatal blow to a company struggling to stay solvent.
Musk’s decision to abandon a short-lived plan taking Tesla off the stock exchange came amid a fierce fight against short-sellers who consider the automaker a sham. Taking the company private was as much about targeting these critics as it was putting Tesla on a firm financial footing.
But his salvo against Tesla’s opponents culminated in mass chaos inside the company and federal probes.
Tesla was turned upside-down after Musk told his Twitter followers in an Aug. 7 post that he secured “funding” to take the company private at $420 per share. His tweet followed a report suggesting Saudi Arabia became a major Tesla shareholder earlier in 2018 and prompted a full-blown Securities and Exchange Commission investigation into his claim.
Private company management is not subject to the usual public monitoring and scrutiny of those that go public — analysts, short-sellers and regulatory agencies, for instance, provide people information about Tesla before they purchase shares. Musk has targeted short-sellers, journalists and analysts in the past for supposedly trying to ruin the company he helped build less than 15 years ago.
Musk’s announcement transpired weeks after a self-proclaimed investment strategist known online only as “Montana Skeptic” claimed in a July 26 blog post that Musk obtained his private information after Tesla devotees doxxed him and published the information online. Montana, a fervent critic of Tesla and other Musk projects, voluntarily stepped away from publishing about the company to protect his employer from possible legal ramifications.
Montana made the accusation less than a week after Twitter user @shortshorterhmm published his personal information online. He has tangled with Tesla fans in the past, including inserting himself into a drawn-out social media spat with journalist Dan Neil, who gave the Tesla Model 3 a positive review in a July 19 editorial for The Wall Street Journal. Neil dinged his Twitter account shortly after the July 20 interaction.
Musk has accused other analysts in the past of unfairly criticizing Tesla. He engaged in an unusual and combative tit-for-tat with reporters on earnings call in April, which ended with Musk calling reporters “boneheaded” for asking questions about problems plaguing his company. (RELATED: ‘Unusual’: Elon Musk Appears To Have Nervous Breakdown During Bizarre Tesla Earnings Call)
Analysts on the call were asking questions about aspects of Tesla’s business model, a model many analysts argue is built on shifting sand. As a result, Musk’s Silicon Valley company frequently fails to meet crucial deadlines and struggles to meet sales goals. Tesla’s Model 3 vehicle has sputtered, flopped and failed to hit the sales marks Musk previously promised.
Tesla’s board of directors’ decision to scuttle Musk’s plan might appease some investors but management experts were left shaking their heads at the chaotic process.
“Tesla investors must realize that they have a panicky, erratic, possibly self-destructive C.E.O. at the helm,” Jeffrey Sonnenfeld, a professor at the Yale School of Management, told The New York Times Sunday. “No C.E.O. is ever this confused and confusing.”
He added: “A major enterprise should not navigate its ownership path and market valuation through the frantic, public, volatile impulses of the CEO … Let alone through the selective disclosures of elite shareholder referenda.”
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