Will Elon Musk grow up in time?

On Thursday the SEC sued Elon Musk for tweeting on August 7 that he had financing to take Tesla private at $420/share. It says the number not based on specific conversations with his financiers, but a guess — based on a 20% premium — that was rounded up to a number that is meaningful in stoner culture in hopes of impressing his new 30-year-old girlfriend.

That the claim had serious repercussions is hard to dispute: the shares had dropped to $320 when he abandoned the idea of going private, and closed at $265 Friday, 24 hours after the SEC suit. Musk walked away from a settlement, and now (seems to) assume that his $420 claim is consistent with is vague oral agreement with Saudi financiers — or that juries don’t like to convict celebrities. (Alas, Johnny Cochran is not available for this trial).

By sheer force of will, Musk created three companies in new (or newly disrupted) industries. Unfortunately, none of them have been profitable — Tesla (now parent of SolarCity) continues to lose money, and (the still private) SpaceX still appears to be losing money.

Many have noted that Musk is his own worst enemy (perhaps like our Tweeter-in-Chief). With executives jumping ship at Tesla (WSJ says 50+ at the VP level in past 2 years), he’s driving away the talent he needs to pull the company out of its CFIT. At age 47, it’s long past time for him to grow up.

I’ve never owned or shorted Tesla shares; at the same time, I’ve always been skeptical of Tesla because of its egomaniacal founder who reminded me more of Howard Hughes than Steve Jobs. In response to the SEC, Musk said

Integrity is the most important value in my life and the facts will show I never compromised this in any way.

This is from the man who in 2008 divorced the mother of his five children to marry a 20-something British actress. (She divorced him four years later). Again, he is more like Howard Hughes (with his fondness for starlets) than Steve Jobs, who at his death was attend by his wife of 20 years, the mother of three of his four children.

Some say you can compartmentalize integrity. Some might argue that Donald Trump never reneged on a real estate deal — or Bill Clinton on a political deal. However, no one could claim with a straight face that integrity was either man’s most important value.

The WSJ’s “Heard on the Street” on Friday summarized the veracity-challenged CEO:

There is a fine line between hyperbole and falsehood and Mr. Musk’s ambitious guidance for vehicle production skirted very close to it. To cite just one example, Mr. Musk told investors in May 2016 that he expected Tesla to produce between 100,000 and 200,000 Model 3 sedans in the second half of 2017; Tesla wound up making about 4,000 of the cars that year.

WSJ columnist Holman Jenkins noted

Even with the SEC suing to remove its visionary chief, Tesla is still worth $45 billion in the market. That’s about $204,000 per car it expects to sell in 2018, compared to $4,900 per car for GM and $20,000 per car for BMW, both of which produce cars at a profit.

In other words, Tesla is still valued as if tomorrow’s expected profits won’t be coming from the car business but from some Musk magic yet to be revealed. Blame Mr. Musk’s Wall Street cheerleaders for fostering this illusion, not the SEC if its action this week finally deflates the Musk bubble. 

There is another possible explanation: Musk is not immature or crazy, but desperate. Sometimes, leaders facing long odds realize that everything has to work just right or they will fail. Last night (Friday), my men’s group last night discussed a book on Ernest Shackleton’s third expedition to Antarctica in 1914-1916, when 28 men survived over a year trapped on the polar ice without communication with the outside world.

These sorts of against-the-odds successes usually require both flawless execution and a few lucky breaks. Although they never employed Tom Brady, my former favorite football team had a succession of quarterbacks (Hadl, Fouts, Brees, Rivers) who mount the frantic come-from-behind passing offense; occasionally it even worked.

Musk got a bad break in 2016: the Democrats losing the White House was bad for Tesla and Solar City, even if it might be good for SpaceX. His projected ship dates seem to assume everything will go well, and such assumptions are frequently proven wrong.

 If Musk gets banished, the prospects are grim for his empire, his wealth and his investors. SpaceX has a capable successor in place — president Gwynne Shotwell — but Tesla does not. Unless Musk starts acting like a grown up — and demonstrate a credible succession plan — it will be hard for Tesla to raise money, attract capable talent and management, and keep the stock price up.

So which is the greater longshot: Musk grows up, or he saves Tesla without a personality transplant? Compared to either one, I think LA’s inferior football team has better odds of winning the Super Bowl this season.