Tesla's Lucky Fans Can Still Stand By Their Man

(Bloomberg Opinion) -- I feel like I’ve had illnesses that lasted longer than Tesla Inc.’s completely serious process of considering a buyout. Or maybe it just reminded me of being ill: the disorientation, the fever dreams, the sense that, surely, it must all end soon.

And end it did, in the most apt way possible: a blog post saying that, after all of 17 days, there wouldn’t be a $420-a-share deal after all. Having begun the saga with an off-hand tweet on Aug. 7 making a mockery of disclosure, Elon Musk put it to rest with a Friday-night news dump that was less than an hour from being an early-Saturday one (on the East Coast anyway).

Of course, Musk says high up in the blog post announcing this volte-face: “Our investors are extremely important to me.” But given the CEO’s recent trouble with what words mean — “funding secured” and all that — it doesn’t seem sensible to just take them at face value.

Further down, Musk writes:

After considering all of these factors, I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree.

What I like most about that bit is the nuance that the board “indicated” its assent, conjuring up images of folks doing that thing where you shrug but also nod your head, like when someone suggests getting pizza and you really wanted Thai food but, sure, it’s late and we’re all hungry.

Several members of the board issued a separate statement, concurring that they had heard out Musk on Thursday, dissolved the special committee on the deal and “fully support” the CEO. I confess myself somewhat thrown by their opening line saying that “over the past several weeks” the board had “put in place a process led by a Special Committee of the Board to evaluate” Musk’s proposal, not least because that committee was only formed 10 days previously and said back then it hadn’t received a formal proposal. 

At this point, statements from Tesla board members read more like indications of proof of life than anything else. What’s most striking about this one, though, alongside Musk’s own post, is that they confirm that this all went down on Thursday, yet the company waited until it was almost Saturday to let everyone know. Tesla declined to comment when I asked for an explanation about this. One imagines, though, it has something to do with just how “extremely important” Tesla’s public shareholders are to the company.

While this whole episode has been dressed up in the language of respect for them, the substance refutes that sentiment utterly. Remember, Musk justified his original tweet — after the fact — by lamenting the public market and how “wild swings” in the stock were a “major distraction.” This is nonsense.

The volatility stems from the fact that, in the absence of profits, Tesla’s stock acts like an option. This has mostly worked fantastically in Tesla’s favor. It is only the self-inflicted wounds of buying SolarCity Corp., making and missing wildly optimistic targets, and Musk’s own brand of personal drama exemplified in his recent New York Times interview that have shown what can happen when belief wobbles and there isn’t a positive bottom line to shore things up.

Musk’s indication that a deal was all but done, when it clearly wasn’t, has only injected further needless drama (and potential legal liability). Besides admitting his “funding secured” claim was based on some non-committal chats with a sovereign wealth fund, Friday night’s admission that “it’s apparent that most of Tesla’s existing shareholders believe we are better off as a public company” undercuts this other tweet from Aug. 7:

Tesla's Lucky Fans Can Still Stand By Their Man

Unless, of course, by “investor” he meant literally one investor was supportive (himself?). It’s a point that may ultimately be debated in court. Because both short-sellers who took a hit when the stock spiked and those who bought on that frantic Tuesday afternoon on the back of Musk’s announcement have an incentive to find out.

It is entirely possible that, come Monday morning, Tesla’s stock still manages to rise on the back of all this. I have no doubt that the most committed bulls would argue that we should focus on this latest distraction having ended, eliding altogether the lingering legal questions and the central mystery as to why it was all started by the CEO’s own hand in the first place. Crazy as that would be, it would demonstrate perfectly why Musk felt able to toss off that initial tweet and then, less than three weeks later, call it all off in a similar show of contempt for shareholders.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.

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