Elon Musk’s dream is dead. Less than three weeks after tweeting that he was taking Tesla private, and that he had secured funding to do so, Musk published a statement announcing that the electric car company would stay public after all.
It is, however, hard to back down from something that was never going to happen in the first place. Musk never had any funding for his plan, as his letter made clear. He had not discussed going private with Tesla’s board or informed the company’s investors. His own idea of “going private” appeared to be a strange fantasy—a hybrid of public and private that ultimately added up to Musk never having to take earnings calls, while retaining all the benefits of staying public, like maintaining access to capital markets and a diversified shareholder base.
Fantasy or not, Musk has found himself in hot water because of his now notorious tweet. The Securities and Exchange Commission is reportedly investigating him for possible securities fraud. Many investors are angry and could sue the company. The statement on Friday was an attempt to minimize the potential consequences of Musk’s rash actions. His decision to keep Tesla public may quell the controversy he’s brought on himself, but his statement—and reports circulating about his behind-the-scenes decision-making—point to more trouble ahead.
If there’s one message in Musk’s letter it’s this: He is listening. He is listening to Silver Lake, Goldman Sachs, and Morgan Stanley, the financial advisers that made it clear how difficult it would be to take the company private. He’s listening to shareholders, who would have lost their stakes in the company in a privatization drive. He’s listening to the board of directors, who were in the dark about Musk’s plans.
Musk being Musk, however, didn’t apologize or acknowledge that he might have erred. He even suggested that he did have the phantom funding to take Tesla private. “My belief,” he wrote, “that there is more than enough funding to take Tesla private was reinforced during this process.” Translation: “I could have done it, if I really wanted to.”
The letter was similar to an earnings call that Musk conducted earlier that month. He received plaudits for clearing the low bar of not repeating the erratic behavior he displayed on a previous earnings call. In contrast to his tweets, the letter showed a certain level of maturity (you can practically see the fingerprints of lawyers, Tesla’s board, and PR consultants). It communicated what many people want to believe, that Musk is a responsible guy who knows what he’s doing.
But the reporting very much suggests the opposite. From Bloomberg, we learn that the Saudis, whom Musk claimed were going to back his privatization plan, were not happy that Musk was running his mouth about their involvement. From The New York Times, we learn that Musk did not see the obvious problem of an electric car company whose stated ambition is to save the world from climate catastrophe taking tens of billions of dollars from the world’s richest petro-state. From The Wall Street Journal, we learn that Musk did not seem to understand that taking the company private would necessitate losing the company’s fiercely loyal investors—or that it would likely mean collaborating with a large automobile manufacturer, like Volkswagen. Nor, the Journal reports, did Musk seem to realize that the new money would come with “strings attached” that might be more onerous than the dog-and-pony show he has to perform every quarter.
It has been clear for some time that Musk is impulsive, combative, and increasingly erratic. But the last three weeks have shown that he also doesn’t know what he’s doing.
Musk’s ignorance of the mechanics of taking a large company like Tesla private is not disqualifying in and of itself. There are surely a number of CEOs who don’t know the first thing about such matters. Facebook’s Mark Zuckerberg, for instance, has never suggested he knows the finer points of securities law. One of the good things about being a CEO is that you can consult experts and lawyers and they will take care of it.
What Musk’s strange odyssey reveals, however, is a lethal combination: a depth of ignorance that is exacerbated by an unwillingness to learn what he doesn’t know. The next few months are pivotal for Tesla, which has struggled to meet production goals and has burned through billions of dollars trying to become a sustainable producer of sustainable automobiles. Musk’s recent behavior suggests that he’s outmatched by the responsibility and challenge of running a company like Tesla.
Tesla is stuck in a paradox. On the one hand, Musk’s involvement is key. Investors believe he is a generational talent, the next Steve Jobs. Even as Tesla has struggled, investors are often soothed by his mere presence. On the other hand, Musk’s bizarre behavior has imperiled the company. Tesla can’t succeed without him—but can it succeed with him?