What's going on?
Tesla’s maverick founder Elon Musk has attracted the attention of regulators after using Twitter to share his plans to take the carmaker private.
What does this mean?
Grimes’s boyfriend started the week by blogging that Saudi Arabia’s sovereign wealth fund was interested in his privatization plan for Tesla. Later, he tweeted that he’s being advised by Goldman Sachs and private equity group Silver Lake – though Silver Lake’s reportedly yet to be officially hired. This comes a week after Musk said he may take Tesla private at $420 a share, claiming public companies can’t plan for the long term. Tesla’s board said on Tuesday it’s formed an independent committee to evaluate any potential proposal from Musk. Tesla’s shares are currently trading at around $356, which suggests investors aren’t yet buying into Musk’s valuation. Poor Elon.
Why should I care?
For markets: Smells like Musk might have tweeted himself into trouble.
Musk’s Twitter disclosures left investors clueless about how advanced his plan was, and – more importantly – whether he’d actually secured funding. US regulators are reportedly investigating whether he misled them. For Tesla skeptics (nearly 30% of its stock is loaned out to investors betting on its decline) [tweet this], it feeds the narrative that Musk is an impulsive leader. Others say his vision is exactly why an unprofitable carmaker is worth more than Ford or BMW.
The bigger picture: The electric vehicle battle is far from over.
Electric vehicles probably are the future, but no one’s sure which logo they’ll have on them. For every Facebook or Google level of success, there’s the slow, quiet death of a rival like Myspace or AltaVista. So far, Tesla’s the only carmaker betting the farm on electric vehicles. Others, like Daimler or Fiat Chrysler, are dabbling with the technology but still mostly producing gas guzzlers. By that logic, Tesla’s set to rule the highways – but technology’s unpredictable. Just ask AOL. Or Blockbuster. Or Kodak. Or Blackberry.