COMMENTARY
Elon Musk has long been compared with Tony Stark, the Marvel Comics inventor who is also the superhero Iron Man. And Musk has come as close as a real-life person can to being a larger-than-life comic book character.
Elon Musk has also attempted to be Henry Ford, at least in a manufacturing sense, and adopt mass production.
On that score? Not so good. Musk’s Tesla Inc. electric-car company has tried to move from virtually hand-built cars to more of a mass-market product, the Model S. He’s been having his problems. He’s been sleeping at this California factory and working ultra-long hours to fix things. To read some recent accounts of his struggles, click HERE, HERE and HERE.
Now, Musk may be giving up the Henry Ford act, at least in public. On Aug. 7, Musk said on Twitter he was considering taking Tesla private at a price of $420 a share. The CEO said the funding for such a move was “secured.” The $420 a share figure compares with its Aug. 7 stock price of $379.44, which in turn was up from $341.99 the day before.
“As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders,” Musk wrote in a letter to employees that Tesla posted on its website.
“Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term,” Musk added.
The thing is, Musk and Tesla didn’t mind the “wild swings” in the company’s stock price when it was mostly going up. The electric-car maker, at times, has been worth more than established automakers such as General Motors Co. and Ford Motor Co. That’s because Tesla was the next big thing while GM and Ford were yesterday’s news.
However, Tesla has entered a “put up or shut up” phase. The company’s Model 3, intended as a mass-market car (or as mass market as a product with a base price of $35,000 but easily costs more with options can be) was supposed to be its breakthrough. Tesla electric vehicles would go from being a niche product to a mainstream one.
Problem: At some point, to please Wall Street banks and investors, you have to deliver on specific targets – not once, but every three months, over and over.
That’s not so much fun. It’s especially not fun when you’re dogged by “shorts” – the investors who are betting against you by selling your stock short. Tesla has long drawn the attention of the “shorts.”
In his letter, Musk indicated he’s wary of that game.
“I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we’re all trying to achieve,” he wrote.
To be sure, Musk hasn’t made a decision yet. Musk says if he proceeds, he’ll offer current shareholders a chance to remain or take the $420 a share price.
Still, there’s an element here of Musk taking his toys and going home. Actually taking Tesla private would eliminate a lot of scrutiny. It will be a lot more difficult to see if the next big thing is, in fact, the next big thing.
At the very least, it will be more difficult to find out if Musk still is sleeping at the factory. We’ll see.
Connect With Us
