Tesla is staying public and Elon Musk’s dream to take it private is all but dead. Elon Musk published the announcement on Tesla’s site on 20thAugust and shared it on Twitter. The statement is the CEO’s explanation for backing away from privatisation. It acknowledges the importance and loyalty of the current stakeholders, and accepting the advice of Goldman Sachs, Morgan Stanley and Silver Lake. Even more importantly, it indicated that this is the agreed position of both Board and CEO.
The tone of the announcement seemed restrained, professional and completely absent of Elon Musk’s personality. One would be inclined to think the company lawyers had their work cut out editing the statement. Another interesting aspect of the statement is that it lacked any form of apology.
Tesla Inc. shares tanked over 6% since the beginning of the private/public drama. The uncertainty around the origin of the funds for the privatisation and subsequent failure to do so made the market nervous.
It soon became clear that the quest for privatisation may have been naïve of Musk. Taking on the board of a competitor car company could mean a piggyback on (what Musk calls) the “Tesla halo” and tech. On the other hand, existing stakeholders and the public would likely be against ownership by the wealthiest petro-state in the world. After all, Tesla’s mission statement is to save the world.
Was it all a distraction?
Some questions have come up regarding the legitimacy of the whole saga and particularly its seemingly convenient timing. Tesla’s struggles to meet its Model 3 production goal of 5,000 cars per week are well documented. Some analysts have since lowered their expectation of the second quarter’s predicted production.
Of equal concern, is the rate at which it’s burning cash. The EV maker had $2.2 billion in cash at the end of the second quarter. Tesla’s current spending pace mean it could run out of cash in as little as 9 months. This means success of the Model 3 is absolutely essential if Tesla is to become sustainable.
A case for a Tesla – Musk paradox
The carmaker seems to be stuck between a wall and a hard place at the moment. On the one hand, the charismatic Elon Musk is hailed by investors as money-making visionary. The market has usually reacted favourably to his hands-on approach in addressing any company issues. However, it has been Musk’s recent erratic patterns of behaviour that put the company in harm’s way. It begs the question if Tesla could drive on without Musk.