Why the biggest threat to Tesla is Elon Musk himself
Tesla CEO, Elon Musk, is living proof that genius brings with itself a whole set of problems. Musk, who has been behind several successful ventures, and is currently mankind's best bet of reaching Mars and making the transition to using clean energy, is also fast emerging as a reason that could see many of these grand plans fail.
And all because of his eccentric – at times, borderline juvenile – behaviour.
In the last few weeks, Musk has seen himself caught in the eye of a storm after the US Securities and Exchange Commission (SEC) took exception to a tweet by him on August 7 in which he disclosed plans of wanting to make Tesla private and claimed that he had already secured funding for the same at $420 for a share.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The problem, however, was that he hadn't.
Going by the letter of the law, the SEC treated the tweet – and others that followed – as misleading and fraudulent.
It blamed Musk of trying to influence investor behaviour and the market – all offences punishable by law. Adding insult to injury, the co-director of its enforcement division, Seven Peikin, went on to insinuate that Musk had crossed these lines of ethics and lied to Tesla's shareholders and investors just to impress his girlfriend.
"While leading Tesla’s investors to believe he had a firm offer in hand, we allege that Musk had arrived at the price of $420 by assuming 20 percent premium over Tesla’s then existing share price then rounding up to $420 because of the significance of that number in marijuana culture and his belief that his girlfriend would be amused by it.”
Shortly after, the SEC framed formal charges and approached Musk and Tesla with the same. Something that the eccentric genius did not take kindly to.
Despite having clearly cooked up facts that ended up influencing the market, Musk remained defiant and in a series of comic incidents, he first rejected and then finally — under the pressure of the board at Tesla — not only accepted the charges but also a settlement offer that would see him paying $20 million in fines out of his own pocket, and also stepping down as the chairman of Tesla for two years.
Now, with all this done, you would think that Musk would have learned his lesson and moved on to the many important projects that he's working on?
Well, you're wrong.
Despite still not being out of the woods, Musk mocked the Securities and Exchange Commission in a tweet last Thursday where he called the agency the "Shortseller Enrichment Commission".
Just want to that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!
— Elon Musk (@elonmusk) October 4, 2018
Although the tweet did not end up forcing the SEC into taking the deal off the table and forcing Tesla and its shareholders to face regulatory action for Musk's behaviour, it did, however, prove that the billionaire genius has very little regard for the fortunes of Tesla and its thousands of stakeholders.
The curious case of the fluctuating share price
Even though Elon Musk would like to believe otherwise, the rise and fall in Tesla's share price during the two-month long fiasco is clear indication of how much damage an out-of-control genius at the helm of its affairs is doing the company.
Case in point: Tesla's shares plunging to $268 the day after Musk sent the original tweet on August 7. As per a report by Bloomberg, the dip in price wiped of almost $20 billion of Tesla's market capitalisation overnight. However, the worst was yet to come.
Over the course of the next two months, the company's shares took a deep dive two more times, taking away on both instances a sizeable chunk from Tesla's valuation and ironically, only gaining heavily once when Tesla's shares rose $45.93 on October 1 — after the news emerged that Musk had accepted the SEC's settlement offer and that there won't be any further action on Tesla.
And this isn't the only time that Musk's antics have led to Tesla's valuation plunging. Since the beginning of the year, the eccentric genius' actions – including launching a $500 'Not-a-Flamethrower' – have contributed to Tesla's shares going down a number of times as well its credit ranking being downgraded.
Clear to signal to Elon Musk
There is no denying that Elon Musk is the singular force behind Tesla's stupendous growth, and his genius and at the very eccentric behaviour in question currently has contributed to making Tesla what it is today. Yet, it cannot also be denied that Musk's antics have now started to hamper the growth of the company — and even the future of the many important projects that Tesla and Musk have planned for the coming decade.
As a public figure, Musk's unsavory tweet targetting British diver, Vern Unsworth, earlier in July – the man involved in the rescue of 12 Thai soccer players and their coach who remained trapped inside a cave for over 17 days – is an example of how he is losing the plot way too often these days.
The investors and shareholders – whom Musk claims to care for and respect – clearly want none of this.
They have, over and over again, warned him of crossing the line.
It's time he listens.