Tesla chief executive Elon Musk over the past week has faced intensifying questions from federal investigators over his desire to take the carmaker private, company shareholders are lobbing legal bombs, and — whoa, look over there!
The billionaire showman has just unveiled another amazing proposal: high-speed passenger pods sailing on electric skates below Los Angeles for $1 a ride. Nothing’s been built yet, and it will be enormously complicated. Musk says it will take 14 months.
The master of distraction is at it again. For every onslaught of negative news, Musk — with help from his business interests in space travel, super-tunnels, artificial intelligence and electric cars — rushes to regain attention with a bigger, positive reaction, often of questionable feasibility but always sweeping in scale and impossible to ignore.
Supercharged by Twitter, Musk beams his stream of consciousness to a global audience, drawing viral attention as he hypes up his fantastical creations and berates his enemies.
That media strategy has also proved effective at diverting attention away from the tough questions at the core of Musk’s empire: how to contain its cash inferno and beat back $10 billion in debts, how to resolve manufacturing woes and worker strife, and how to address Musk’s vast promises and visceral attacks.
“He’s not unlike the president of the United States — the way he’s using the media and how he’s seen it’s effective,” said Dave Lyons, who worked with Musk for four years as Tesla’s 12th employee and is now a co-founder of the automotive-tech firm Peloton Technology. Lyons said Musk has a “cavalier, take-no-prisoners attitude. He does not like to be challenged.”
The Musk method has perhaps met its match with his latest gambit — his surprise announcement last week that he had the “funding secured” to take the $60 billion all-electric automaker private.
The pledge offered the promise of a brave new Tesla, free to pursue its grandest ambitions, and obliterated the short-selling investors Musk despises by sending the stock soaring 11 percent.
But it may also have backfired. Securities and Exchange Commission investigators are pursuing the company over what former SEC officials say could involve potential fraud or market manipulation; shareholders have filed four lawsuits; and an army of legal and financial advisers is assessing a deal some analysts expect has worse odds than a coin toss.
Musk did not respond to emails or Twitter messages, and a Tesla spokeswoman said Wednesday that “we’re not doing any interviews at this time."
On Thursday, Musk gave an emotional hour-long interview to the New York Times during which he bemoaned the chaotic workload he had given himself during what he called “the most difficult and painful year of my career.”
Musk added that he sometimes took Ambien to help him sleep — medication he revealed in a tweet last year when he wrote, “A little red wine, vintage record, some Ambien ... and magic!” — and worried his health was suffering from relentless 120-hour weeks.
He said he sent his momentous “funding secured” tweet while driving his Tesla Model S to the airport and said, “From a personal pain standpoint, the worst is yet to come.” Tesla stock fell nearly 9 percent Friday.
Tesla’s board, excluding Musk, provided a statement Friday saying that “there have been many false and irresponsible rumors in the press about the discussions of the Tesla Board. We would like to make clear that Elon’s commitment and dedication to Tesla is obvious.”
“Over the past 15 years, Elon’s leadership of the Tesla team has caused Tesla to grow from a small startup to having hundreds of thousands of cars on the road that customers love, employing tens of thousands of people around the world, and creating significant shareholder value in the process,” the statement said.
Tesla employees say they have tried to keep their heads down as drama rages in the executive ranks. A worker at Tesla’s carmaking factory in Fremont, Calif., who had just finished a 12-hour night shift on the all-hours production line and who requested anonymity to speak candidly without fear of losing his job, said late Thursday that he and his co-workers had no interest in the company’s latest industrial soap opera.
“We’re still struggling,” he said. "We want to have a better retirement plan. We don’t care how Elon rants on Twitter.”
Asked for advice he’d give Musk, he said, “Less crying on Twitter, more trying to help us get the work done."
No one doubts, however, that Musk’s go-private tweets helped the car company dodge pointed questions about its long-term viability, spurred by recent months during which it recorded its biggest quarterly loss in company history. Musk “completely changed the conversation. It was basically like, ‘Oh, wait, what were we talking about before?' ” said Kevin Landis, the chief investment officer of Firsthand Funds, which owns about $2.5 million in Tesla shares.
“Two weeks ago the questions were all about short-sellers and cash burn and why there are parking lots full of Model 3s,” Landis said. “Those have been completely pushed out of the conversation today. Mission accomplished.”
Like President Trump, Musk has faced growing pressure to rein in his outbursts. In recent weeks, Musk offered rare apologies to a hero of the Thai soccer-team rescue, who he had labeled a “pedo,” and to analysts he had dismissed for asking “boring, bonehead” questions during a quarterly earnings call.
Tesla has never turned an annual profit and has seen some of its largest shareholders trim their stakes by about 20 percent in the second quarter of the year, trading data shows. On Thursday, analysts from the investment bank UBS said Tesla would not be profitable selling its newest model at its long-promised price of $35,000 — a critical hit to Musk’s years-old pledges of profitability and mass-market relevance.
Musk has acknowledged few of those bitter pills on Twitter. But his rapid churn of shiny objects has led fans and critics to label him the P.T. Barnum of Silicon Valley, pointing to his impulsive, out-of-nowhere promotions of company-branded flamethrowers, in-car video games, his quest to colonize Mars and Tesla “short shorts” — a phrase Musk has used to heckle the short-sellers he openly reviles.
The Los Angeles passenger pods unveiled this week are part of Dugout Loop, a proposal that Musk’s Boring Co. says will whisk passengers via tunnels to Dodger Stadium at the speed of about a mile a minute. The company, which proposed a similarly controversial project in Chicago, said it had been targeting its debut this week long before Musk’s fateful tweets.
Musk also pledged last month to “fund fixing the water in any house in Flint that has water contamination above FDA levels. No kidding.” The company did not provide any updates on that pledge, and Musk has said nothing about it since.
Musk’s knack for shock and storytelling has helped boost his automaker, which doesn’t advertise, into the most valuable and talked-about U.S. car company. Nu Wexler, a Facebook spokesman, tweeted Thursday that “Tesla has approximately 1% of the car and light truck market in the United States, and 90% of the media coverage."
But Musk’s abrupt commitment to taking Tesla private — a massive transformation, to the tune of tens of billions of dollars, for which most companies would spend months or years preparing — has outdone all of his other bombshells. Earlier this week, he compounded the pledge by saying a Saudi Arabian wealth fund would help fund the prematurely announced deal; the fund has yet to publicly comment.
Musk said in a statement earlier this week that he made the announcement to be “completely forthcoming” with investors about his desire to uproot the company from public markets.
But the cost of all these surprise maneuvers is adding up. The company has retained white-shoe law firms, buyout specialists and the investment bank Goldman Sachs to act as legal and financial advisers for the potential deal. The company is also facing four lawsuits from investors who said Musk’s misleading boasts led them to buy stock at inflated prices and suffer “significant losses and damages once the truth emerged.”
The lawsuits and investigations will center on how certain Musk was about the deal’s financing and support when he floated it. Days after Musk tweeted that the deal was such a sure thing that it needed only a shareholder vote, the board pumped the brakes, saying it had not received a formal proposal and convening a special committee to evaluate any potential plan.
“The reason people are giving credence to this [deal] is because Elon Musk said it. But we know Elon Musk says things that simply aren’t true,” said Gordon Johnson, an analyst with the Vertical Group research firm who says Tesla’s stock should be worth a quarter of its current value. In a note to clients this week, he said, “We think it’s fair to say belief in Elon Musk is on the decline.”
Securities investigators in the SEC’s San Francisco office have also dug into Musk’s recent tweets and the company’s disclosures about production of its long-delayed Model 3, according to people familiar with the probes.
The SEC has declined to comment. But former SEC enforcement lawyers said they expected investigators to conduct interviews and grab as many emails, meeting minutes and other documents as necessary to assess whether Musk intended to mislead investors.
Potential whistleblowers at the company, meanwhile, have multiplied, filing tips with the SEC and claiming the company covered up or failed to disclose key information to the public. Tesla representatives said one former employee’s claims were “outright false.” Musk sent his own thoughts via private Twitter message to the tech blog Gizmodo. “This guy is super [nuts],” Musk wrote, using an emoji of a peanut.
Landis, the Tesla shareholder, said keeping up with the corporate kabuki is all a part of life as a Musk investor — even if, as he noted, Musk’s “stream of consciousness” could tend to make some shareholders “uncomfortable.”
“You get on a roller coaster knowing you’re going to pull some Gs,” he said. “If you’re investing in a company like this that’s absolutely driven by a personality, that’s part of the package.”