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There is no doubt that Elon Musk has a brilliant mind and an amazing ability to bring multiple moving parts together so can Tesla survive if Musk walks? Sam Crugnale examines the ever-evolving story of Elon Musk and Tesla.
In August Musk tweeted that he would take the company private at $420 a share after ‘securing’ funding from institutional investors.
He then appeared on the popular YouTube channel “The Joe Rogan Podcast” which has been viewed millions of times.
Elon is seen smoking what appears to be marijuana and opens up on what it’s really like to be the CEO of a company that is now larger by market capitalisation than Ford.
Then the Securities and Exchange Commission (SEC) came calling and Musk was forced to relinquish his chairmanship of Tesla for at least the next three years and pay a $20m fine.
In the latest stunning development, however, Tesla announced that it has pulled out of the agreed settlement and it’s now likely that the board is readying itself to fight the SEC in court.
Musk is a walking soap opera. Controversy never seems to be very far away. But he’s also a genius and a visionary. That the Tesla board is now preparing to fight the SEC is perhaps an indication that they feel that they need Musk.
Tesla stock is up some 10-fold in five years, has no earnings and trades on a P/Book ratio of 10x.
Tesla is the fifth biggest auto producer in the world by market cap and “wonderkid” Musk is now talking about taking folks on joyrides to Mars.
It’s worth dialing back the clock and taking a brief look at Enron. Between 1996 and 2001 Enron was named “America’s Most Innovative Company” by Fortune magazine.
Yet various smart investors had figured out that Enron wasn’t worth what the market was pricing it at and that was when it was trading at a lot less than the $90 per share, and we all know how that ended – with Enron filing for bankruptcy and equity holders being completely wiped out.
Of course, Enron was guilty of large-scale institutionalised fraud and there’s absolutely no suggestion of that at Tesla, despite Musk’s Twitter misdemeanors.
The accounting is quite simply financial spaghetti and with the SEC asking questions, it’s vastly worse now.
Tesla’s share price fell as much as 25 per cent following the subpoena.
On that note, investors are still concerned on Tesla’s ability to pay its debt – convertible bonds, promissory notes, term loans, cash-equity debt, asset-backed securities.
Most of the total is tied to Tesla the automaker. As the focus has largely been on the burn linked to struggles speeding up production of the Model 3, the sedan Musk is betting will be the first to bring electric cars to the masses.
The good in Musk:
Focus on the big picture
Be prepared to sacrifice
Don’t listen to the critics
The bad in Musk:
Social media is taken seriously
Market turmoil is a concern
Corporate governance is important
Luke Talbot-Male, Adventures Beyond
Phillip Cross, Royce Cross Agencies