The bombshell tweet triggered a market explosion that is still causing havoc. In the subsequent 10-day period, the share Tesla?has been on a tweet induced roller-coaster, the SEC started an investigation, and to round it off, Musk revealed that this year was “the most difficult and painful” of his career. So, what exactly is going with
What triggered this?
Tesla has been focusing its efforts in ramping up the production of Model 3, the only sub $50,000 car offered by the automaker. It is the most affordable car in Tesla’s range and has been hailed as a milestone in “democratizing” access to the ever-growing luxury electric car market. The pressure to increase production volume has come both internally, and from the thousands of would-be customers that happily paid a deposit to get their hands on the first models to come off the production line. Tesla’s Model 3 factory is currently able to churn out around 5,000 to 6,000 cars per week, a number that should have been hit by the end of 2017.
The manufacturer had to repeatedly push delivery dates of their latest car earlier this year. These delays have reportedly had Elon Musk sleeping in factory grounds to make sure production does not stop.
The Twitter connection
Enter Elon Musk’s infamous tweet claiming to have funding to taker Tesla private. This took analysts by surprise, and it was not clear where the funding would come from. Musk later explained he was certain that Saudi Arabia Public Investment Fund would provide funding to take Tesla private. This was based on a meeting held between the fund’s managing director and Musk on 31 July. He also said to have been in talks with other investors, further suggesting that no legally binding deal had been made yet.
Elon Musk famously uses the social network to announce anything from product launches to his personal opinions. He often vents his frustration with tweets and has also taken upon himself to resolve Tesla related issues conveyed by customers that tagged him. Musk says he has no plans to stop using the platform.
Tesla shares shot up 11% when the “funding secured“tweet came out. The $420 price mentioned in said tweet represents 9% above the stock’s record of $385 on 18 September 2018. The company has gone through an intense scrutiny and the effects are being seen in its volatility. There is a palpable nervousness surrounding the outcome of the SEC enquiries.
Enter the Securities and Exchange Commission
The SEC was not amused by the outspoken CEO’s latest antics and has begun to make enquiries about the company’s plans on going private. It has been widely reported that the SEC has sent Tesla a subpoena. This brings the formality of the enquiry up a notch and could hinder the automaker’s efforts to be privatised.
What will happen with Tesla and Elon Musk?
The two are so intertwined it is sometimes difficult to dissociate the company from its CEO. Last Friday, 16 August, Elon Musk appeared in an interview, after 9 days of intense scrutiny. He goes on to state “this past year has been the most difficult and painful year of my career”. The chairman and CEO of the electric-car maker describes how he’s been working 120-hour weeks and taking sleep medication. He choked up several times throughout the interview detailing the events that lead to the 7thAugust tweet.
The Tesla board has grown increasingly worried – even angry– with Musk, and has explored the incorporation of a COO to assist him in running operations. Yet, he is to retain his position at the helm of the company. According to Musk himself:” If you have anyone who can do a better job, please let me know, they can have the job. Is there someone who can do the job better? They can have the reins right now.” After all is said and done, could privatization be the way to go? It could ease the pressure of product development being bound to quarterly-reports, a definite advantage in the auto industry. Nevertheless, it is worth noting that other major auto manufacturers are listed in stock markets, and successfully operate under the same reporting constraints.