Musk meltdown: If Elon doesn't shut up, he'll be shut out
Elon Musk will be the architect of his own downfall if he doesn't refocus on his business
Somebody please stop Elon Musk. The billionaire Tesla and SpaceX founder’s erratic activity has the potential to cause long-term damage to his business – and there seems to be nothing that major shareholders can do about it.
Musk can’t seem to help himself. It’s true that he has never been one to follow convention – his antics on an earnings call earlier this year, in which he lashed out at analysts for their “boring, bonehead questions”, are testament to that – but in the past this eccentricity has only helped to bolster his popularity among a loyal army of fans.
Now, Musk appears to be on a downward spiral. He went from hero to weirdo within a few hours earlier this year when he heroically volunteered to help a group of children trapped in a cave in Thailand and then accused one of their rescuers of being a paedophile.
His public relations machine has struggled to keep up. Every apology or retraction has been countered by another outburst.
For instance, although he apologised after his first “pedo” comments, Musk refused to let it go. In a series of Twitter exchanges he taunted the diver’s decision not to sue him for defamation, and in an exchange with a Buzzfeed journalist this week, Musk reiterated his accusations.
“As for this alleged threat of a lawsuit, which magically appeared when I raised the issue (nothing was sent or raised beforehand), I fucking hope he sues me,” he said in the e-mail.
Aside from a libel case, Musk is facing scrutiny and a potential penalty from the Securities and Exchange Commission, which launched an investigation after he publicly tweeted plans to take the company private, causing a 13% share spike, and said he had already received financial backing for the plan.
A statement from the board saying they had heard about the proposal did little to stem the rumours that he was out of control.
A teary-eyed interview with the New York Times, which could have helped to raise sympathy for Musk, quickly backfired when he entered into a quarrel on Twitter over whether he cried or not (he said not).
And recent revelations from inside Tesla’s factories do little to assuage concerns that the stress is finally getting to Musk.
He has repeatedly spoken about sleeping in his office, and The Wall Street Journal said earlier this year that Musk had started headbutting a car when he realised the production line stopped when people got too close to it.
According to a Business Insider investigation this week, he has also taken to forwarding e-mails he receives from employees to line managers, writing “WTF”, causing a scramble to research and resolve the issues, and has urged his staff to walk out of meetings if they're not productive.
“If there was a way that I could not eat, so I could work more, I would not eat,” Elon Musk once famously told a friend. “I wish there was a way to get nutrients without sitting down for a meal.”
He has since admitted that he works 120-hour weeks and spent his birthday holed up in a Tesla factory for 24 hours.
Personal and executive coach Sally Ann Law said that if she were counselling Musk she would tell him to “get over himself” and “lock himself in a retreat and let someone else do his job”, pointing out that “people running countries take time off, so he needs to ask is he really that important?”
But there’s a bigger problem
Regardless of the personal consequences for Musk, these antics have done little to help Tesla, which has high levels of debt and has struggled to hit Model 3 production targets.
The share spike caused by Musk’s take-private announcement in early August has turned into somewhat of a gradual slide down for the company’s shares, which have already dropped by 23.8% from $379.57.
Scrutiny of Musk’s public persona is not helping the company’s image, but it is playing second fiddle to competitive forces and production issues, says Accendo Markets research analyst Artjom Hatsaturjants.
“The more medium- to long-term perspective looks more grim, though,” he says.
The need to improve production – that was hyped up by Musk’s bragging on Twitter – could mean its debt position worsens, Hatsaturjants says. The shadow of looming SEC investigation will also dampen investor appetite for the shares.
A recent report from Goldman Sachs will not help matters. The bank that Musk hired to help him take the business private last month, predicted on Tuesday that shares in the electric carmaker will fall by 30% in the next six months.
The bank cited competition from other electric car makers as the main reason behind the forecast, although the company’s supply chain issues, which are directly affected by US President Donald Trump’s trade war with China, are also worrying.
Rather than worry about his Twitter reputation, Musk should focus on the business. After all, recent examples of crises centred on CEOs have ended worse for them than for the business.
This year alone, Papa John’s founder John Schnatter was ousted after he used a racial slur in a meeting, while WPP former boss Sir Martin Sorrell quit after a misconduct scandal, and bookmaker Barnes & Noble got rid of CEO Demos Parneros for “violating company policies”.
Patrick Barrow, from reputation management company Reputation Communications, says the problem Tesla has is that there is nobody in the company ready to take the helm: “When you bind a company so much to one single personality, which is certainly the case with Tesla, when the personality suffers, so does the company.”
Tesla has reportedly been on the hunt for a deputy to Musk for years, in a bid to ease his workload, but it has been unable to find the right person. Earlier this year, it emerged that Tesla had approached Facebook chief operating officer Sheryl Sandberg for the position, but those talks had not progressed further, and Musk said the company was now no longer actively searching for a number two.
“It will be hard to find someone willing to take the job,” argues Morningstar equity analysis strategist David Whiston.
This doesn’t mean that he should be barred from the helm of the company. “For now Musk is effectively Tesla, and without him Tesla is just a capital-intensive automaker burning cash with too much debt due soon.”
If Musk’s outbursts continue, this could prove a deal breaker for investors.
“Randomised personal accusations against people who have clearly done something good followed by veers to the left on strategy like selling the whole thing to a Saudi Arabian fund, do not suggest there is a clear-minded direction going on in the company,” Barrow says.
“If you add in behind that the stories of him sleeping on a camp bed, nights in the desert and so on, it does suggest that someone is at the steering wheel of this car that clearly shouldn’t be. Tesla has to remove or at least isolate the problem and the problem is plainly Elon Musk’s behaviour at the moment.”
Emma Donaldson-Feilder, a psychologist at Affinity Health at Work, says someone in a more senior position is more likely to struggle.
“If somebody very senior is actually very isolated and doesn’t have much in the way of support, and perhaps their control is limited and their autonomy is limited by the demands of the shareholders or marketplace, that may reduce the beneficial effects, of more control and support, that come with being in a senior position,” she explains.
It’s lonely at the top, and Musk is effectively stuck in a gilded cage of his own making. Nobody is willing to oust him no matter what he tweets – at least for now.
– © The Daily Telegraph