As Cheddar reflects on 2018, we are profiling the most innovative, flamboyant, and often-controversial entrepreneurs and corporate leaders who delivered the year's most memorable moments in business. Of the CEO Class of 2018, who was crowned Biggest Flirt? Most Likely to Succeed? Check Cheddar.com for all the Cheddar Awards and more year-end coverage.
Cheddar Awards 2018: Elon Musk is Class Clown
By Chloe Aiello
It was a slow news week in August until Elon Musk decided to fill the silence.
"Am considering taking Tesla private at $420. Funding secured,” Musk wrote on Twitter.
A series of defensive tweets, two months of headlines, and one Securities and Exchange Commission investigation later, those nine words would cost Musk and Tesla ($TSLA) a combined $40 million. Shareholders suffered, too; the tweet initially sent shares higher, but in the ensuing weeks, shares fell 31 percent to $260 per share on Oct. 19.
The worst part? That may not have been the craziest thing Musk did all year.
At the close of 2017, Tesla was falling far behind its production goals for the mid-range Model 3 ー Musk had a self-imposed quota of 5,000 vehicles per week that kept getting pushed back. That put the company in a precarious position ー profitability is contingent on its ability to produce the affordable electric Model 3 at scale.
For Musk, the options were clear: meet production goals, raise capital, or die trying.
Just a few months into 2018, Musk made it abundantly clear that raising capital wasn’t his preference. On Apr. 1, he sent out a series of April Fool’s tweets, and claimed in one that Tesla “has gone completely and totally bankrupt, so bankrupt, you can’t believe it.” Another featured a photo of a stubbly Musk sleeping on a Tesla vehicle. He held a sign that read, “Bankwupt.” Although the tweets were obviously jokes, investors weren’t amused.
Some felt Musk had gone too far ー as the comments came on the heels of an especially tough few weeks for Tesla. The company had to recall more than 100,000 of its Model S sedans and was then downgraded by a credit agency which said the company need might to raise billions if it fails to meet Model 3 production goals.
About a month later, the funding issue resurfaced. This time, Musk wasn’t laughing. He got hostile with Toni Sacconaghi, a Tesla analyst from Bernstein, who asked about the flailing carmaker’s capital on a quarterly call.
“Next. Boring bonehead questions are not cool. Next,” Musk said, according to Bloomberg.
Musk later admitted that Tesla had been very close to financial death early on in 2018. In an interview on “Axios on HBO” in November, he said the carmaker was “within single-digit weeks” of going belly-up.
But as Tesla continued to miss Model 3 production goals and burn through cash, Musk’s public-facing behavior grew increasingly erratic.
In June, a team of young soccer players became trapped in a Thai cave by rising monsoon rains. Musk jumped into the rescue effort, offering to build a mini-submarine to help transport the boys to safety. He did actually complete and send the submarine to Thailand, and even visited the caves himself. The technology was not ultimately used.
After one of the lead rescuers [criticized Musk’s involvement as a “PR stunt”, Musk retaliated on Twitter, calling the diver a “pedo guy.” He later apologized for the bizarre and baseless accusation but was sued for defamation.
Tesla eventually met Musk’s lofty 5,000-per-week goal for Model 3 production in early July. Then came the now-infamous “$420” tweet.
When the SEC eventually launched an investigation probing whether Musk had misled investors by claiming he had the “funding secured” to take Tesla private (he didn’t) and later filed a lawsuit, it almost seemed critics’ concerns had come too late.
Under increasing pressure, Musk continued to act out. He smoked marijuana with comedian Joe Rogan during a live podcast and admitted the $420 price target was an arbitrary one meant to please girlfriend Grimes. He denied in a Sunday interview with 60 Minutes' Lesley Stahl that he smokes marijuana, saying "as anyone who watched that podcast could tell, I have no idea how to smoke pot."
After all was tweeted and done, Musk was forced to cede his role as chairman of Tesla’s board. That plus the $40 million fine he split with his company amounted to a slap on the wrist for the billionaire. His settlement with the SEC also required that a lawyer review communications by company officers on Twitter and other social media and that “mandatory procedures and controls” be implemented to oversee all of Musk’s communications.
Musk’s trigger-happy social media fingers really were his worst enemies in 2018, a year he called “the most difficult and painful” of his career in an emotional interview with The New York Times. The Times said Musk “alternated between laughter and tears” throughout the course of the hour-long interview, in which he detailed the “excruciating toll” of running multiple companies ー Musk, of course, is also the CEO of SpaceX and the Boring Co. ー and sleeping on the floor of the Tesla factory in order to meet deadlines.
In what might be some good news for Tesla shareholders, the automaker is on track to finally hit that now-fabled $420 per share goal in 2019, according to CFRA research. But for Musk, losing the chairmanship of his company may not have been enough to teach him a lesson. He continued to troll the SEC on Twitter, even as the settlement was being drawn up, and in the aforementioned 60 Minutes interview said he has no respect for the agency.
“I want to be clear. I do not respect the SEC. I do not respect them,” he said in the Sunday interview.
Furthermore, he said no one reviews his tweets before they go out, unless it might potentially influence stock pricing. So unless the CEO smartens up or the board takes the reigns, 2019 might be another bumpy year for Musk.