$180,000,000,000; This is the projected figure, as revealed by sources of the Fortune in January of 2018, that Elon Musk’s stake in the automaker Tesla Inc. will be valued at by 2028, if he succeeds in leading the company to the 12 financial performance milestones set by its Board of Directors. Thus, making him the richest man on the planet and any other planet, he wishes to conquer *enter SpaceX plug*.Since January, however, Tesla has stopped the production of its bread-winner Model 3 car twice, due to undisclosed reasons and in September, its Chief Accountant resigned after 1 month on the job citing volatility and irreconcilable differences with Musk’s future strategy. On the other hand, the eccentric billionaire has called a Thai rescue diver via Twitter, a pedophile, and just in September, smoked marijuana on the televised, The Joe Rogan Podcast, tanking Tesla’s shares.
This begs the question, will the duo rule the Financial Kingdom, or will they be removed from it, in what appears to be the only two avenues for this Unhinged Beast?
Tesla, starting off as a pet project of Dot-Com millionaires Martin Eberhard and Marc Tarpenning, came into contact with Elon Musk in 2004 with the start of Series A Financing, which Musk spearheaded with personal funds, and through this investment, became the Chairman of Tesla and took on operational roles, to a limited extent. Till this point in time, Tesla was a rather dormant company, with plans for a car in the future inspired by General Motor’s EV-1. However, things slowly changed with Tesla Inc. signing a deal with Lotus to construct the body work of what would eventually be the original Tesla Roadster, a car powered by Tesla Batteries.
Furthermore, Musk’s current role in Tesla only came about in 2007, when the company faltered and was nearing bankruptcy. Musk took over control or in his words, “put both hands on the wheel of the company”. Starting with forcing Eberhard to resign and appointing one of his own as CEO of the company. But the losses never ceased, and thus, in 2008, he placed himself as the CEO of Tesla Inc. and took total administrative control.
Since the dark ages, change has been the only constant at Tesla, for both the company and its promoter. Tesla has rocketed into fame as a revolutionary company and Musk has, to say the least, become a cult figure. The Model 3 vehicle was announced in 2014 and it was reported in 2016 that it had already accumulated 500,000 reservations or over $21 billion in suggested revenue by future sales by July of 2017. With the launch of the Model 3 (affordably priced at $43,000 (on average) in the US market), Musk has threatened the Automaker-Diesel relation and has emerged as a surprising disruptor in the Auto industry. Before the 3’s launch, Tesla’s Model’s S and X belonged to the luxury car sector and thus, didn’t affect the market of the major dogs in the Auto-Industry. In the last year, the disruption caused by Tesla has shown its consequences; General Motors has revealed a plan to launch a minimum of 10 new Electric Vehicles by 2022 and more importantly, Daimler-Ag, the parent company of Mercedes-Benz has announced a $12 Billion planned investment into the Electric Vehicle sector and a sound plan to expand its Electric Vehicle portfolio in Europe, where Tesla has started to make a substantial mark, and in the Americas.
The worries of the traditional Automakers are clearly shown when Daimler-AG’s Chief Executive says “There is no alternative to betting on electric cars, and we’re going all in … It is starting right now.”; such sentiments are the exact opposite of what the general feeling around the Auto-Industry was before Tesla, and thus, the company has forced Automakers to accelerate their plans for Renewable Energy based cars by around 20 years, previously structured in anticipation for the paucity of Petroleum.
Such ramifications from the plans and actions of Elon Musk have anointed him, and Tesla, as ‘Beasts’ in the Auto-Industry. The expansion that Musk has panned for Tesla is yet to entirely unfold, with Tesla planning to make cars even more affordable and dabbling into the Budget-Family Car sector soon (Code Name: Model Y) and also, furthering his company into the Commercial Vehicles through the recently launched Tesla Semi (Semi-Trailer Truck) whilst launching the new Tesla Roadster, maintaining its original image of a sports car brand. Furthermore, given its long time as an electric carmaker, it has excelled in terms of infrastructure i.e. charging station etc. with around 1400 Charging stations available around the world, offering charge to the Tesla owners, free of cost.
Considering the achievements of Elon Musk and Tesla, one would think that their success would be sustainable, but that couldn’t farther from the truth. Their rise has been riddled with controversy at every step of the way, including production problems of the Model 3, which negatively impacted the stock for most of the last year, and Union disputes at its factories, with its workers filing unfair labor practice charges against the company alleging “illegal surveillance, coercion, intimidation and prevention of worker communications”. The biggest contest, however, has been the most recent one: The Securities and Exchange Commission. The entire saga revolves around Elon Musk’s favorite weapon, Twitter and the SEC’s premiere charge, Securities Fraud.
On August 7th, Elon Musk took up his Twitter account and tweeted that he was about to buy back Tesla, at $420 a share and that funding had been secured. The news of the proposed $72 Billion deal skyrocketed Tesla shares by 11%, much to the angst of the investors shorting Tesla’s stock. In 17 days, however, Musk declared that the plan had fallen through. In less than a month, Musk and Tesla were facing multiple lawsuits from investor for stock manipulation and the United States Department of Justice had started an investigation into the activities at Tesla. Finally, the SEC also dropped its hat in the ring and opened its own investigation, starting with filing a subpoena for all documents regarding the “buyback” plan that Musk has allegedly drawn up. The Commission, after investigating, also filed charges against both Tesla Inc. and Elon Musk, for Securities Fraud.
However, like in most cases with power players on Wall Street and large corporations, the SEC decided to make a deal with Musk and Tesla. An agreement was made to the extent of an undisclosed amount of cash, and an assurance that Elon would not go out and question the actions of the SEC or in turn, defend his tweets to the public. He would perennially be in a “neither confirm nor deny” mode vis-à-vis this situation; this was unacceptable to Elon Musk, and thus, after agreeing to a deal, when it came to signing the actual deal, he rejected it. Obviously, the SEC was unimpressed and decided to raise the stakes, suing Musk personally again.
Since then, however, cooler heads have prevailed. A new agreement was signed and ratified wherein Musk and Tesla would pay $20 million each as fines to the SEC, Musk’s tweets would now be monitored through Tesla and finally, Elon would have to vacate the position of Executive Chairman for a time of three years, within 45 days, whilst allowing him to maintain his CEO position.
Since the onset of this saga, the stock of Tesla has gained, tumbled and now, stabilized. However, we cannot deny that the controversy that follows Musk has had an overall negative impact on Tesla. When you consider new revelations that he only declared the buyback price as $420, instead $419 which was the official calculation, to impress his new girlfriend, given the special connotation of the number 420 to marijuana users. Whilst no one can in the financial world can deny that Tesla Inc. has reached its influential heights due to the brilliance of its charismatic chairman, his long-sighted outlook and inspirational personality, his recent rise as a personality has forced some on Wall Street to ponder the value of Musk at Tesla, in an organizational sense.
For every Gigafactory that Musk establishes, he tweets another controversy into existence. The future of Tesla is truly uncertain, given the recent changes that have taken place in its organization. With the coming in of two new independent directors to the board of Tesla and a new Chairman, change is yet again coming to Tesla; where Musk fits into the change is unbeknownst to everyone. Whether Tesla Inc. and/or Elon Musk might change we cannot say. But what we can say is that we are talking about the Beasts of the Financial Kingdom.