The day Elon Musk landed his $44bn Twitter coup, the Tesla chief executive flew to Boca Chica in Texas, not to relax on the sandy beach but to attend his regular 10pm meeting at SpaceX, the rocket business that he also heads.
The billionaire, who also oversees tunnelling enterprise Boring and brain chip venture Neuralink, will have his multitasking abilities put to the test when Twitter becomes the latest spinning plate in an already precarious collection.
The question for shareholders in Tesla, still the only direct publicly listed avenue for investors wanting exposure to Musk, is to what extent his latest curiosity will distract him.
“I’ve learnt that it’s wrong to underestimate his extraordinary energy and bandwidth,” said James Anderson, a portfolio manager at Baillie Gifford, one of the carmaker’s earliest investors and a top 10 shareholder. “What we are hearing suggests that [Tesla] is running so well that Musk isn’t or doesn’t need to be involved day-to-day.”
Once a struggling start-up that fumbled efforts to mass produce its cars, the business has matured almost beyond recognition.
In the past two years alone, Tesla has opened its Shanghai factory, a facility in Berlin built in record time and its new Texas plant, where the ribbon was cut this month at a rodeo-themed party hosted by Musk.
The brand turned a profit of $5bn in the first quarter and is on track to sell 2mn vehicles this year. It harbours an ambitious goal to raise this to 20mn sales a year by 2030, which would make it larger than Toyota and Volkswagen combined.
“Does he need to be as involved? Probably not as much as a year ago, and totally not as much as two to three years ago,” said Gary Black, managing partner at The Future Fund and one of the many investors that use Twitter as a platform to lay out the Tesla bull case. “If there was going to be a time for him to do Twitter, it’s now.”
Musk manages his time with a forensic level of detail, according to several people who have worked for him. His timetable used to include Monday and Tuesday at SpaceX, Wednesday and Thursday at Tesla, and Friday spent in product review at both companies, hopping between locations on his private jet while juggling emails.
“He was very disciplined about that rhythm — impressively so,” said one former Tesla executive who reported directly to Musk, adding that his schedule on days he was not travelling internationally was “cast in stone”.
At one point, he split his working day into five-minute slots to maximise his output, and regularly puts in days that can run towards 20 hours.
“I am no more worried about Twitter being a distraction from Tesla than I am about Tesla being a distraction from SpaceX,” said one top 20 shareholder.
Yet Musk will inevitably need to rely on a host of deputies at his operations. At SpaceX he has Gwynne Shotwell, the long-serving chief operating officer, while Drew Baglino at Tesla is the most senior executive after Musk and finance chief Zach Kirkhorn. It is not yet clear how involved Musk intends to be in Twitter’s day-to-day management.
A second former Tesla executive who reported to Musk said the chief executive typically spread responsibility around the carmaker’s managers rather than relying on a single traditional operations chief as he did at SpaceX. “It’s just the way he operates,” the ex-director added.
One potential issue may be the time implications of an additional location. “He now has so many more points on the map he has to go to,” said the first former Tesla executive.
Twitter is based in San Francisco, while SpaceX has an office outside Los Angeles and a launch base on the Texan coastline. Tesla, once confined to its Fremont plant and a Nevada battery factory, now has the Texas, German and Chinese plants also demanding Musk’s attention.
“He loves to travel [from] place to place to all the factory floors and be in engineering meetings,” said Walter Isaacson, who is writing a biography of the entrepreneur. “But he does some meetings these days virtually.”
Musk will have to keep one eye on the Tesla share price. His stock in the carmaker forms part of the complex, hastily assembled funding for the Twitter deal.
Musk has pledged $12.5bn from a loan secured against his Tesla shares as part of a package that also includes $13bn of debt from banks and $21bn in cash.
The day after the Twitter deal was announced, Tesla shares fell 12 per cent, wiping more than $125bn off the carmaker’s value, over fears Musk would have to sell stock to stump up the remaining cash needed for the buyout.
Further falls would increase the number of shares he has to ringfence as collateral on the deal.
“It’s dawning on people that if he has to leverage up some more to buy Twitter, what happens if Tesla shares have further to fall?” said Jim Chanos, the hedge fund billionaire and renowned short-seller who has a longstanding bet against the carmaker.
“There’s no room for error in Tesla’s valuation, he has to keep executing. He has to keep growing at 40-50 per cent a year with 30 per cent gross margins,” Chanos said.
Black said Musk’s “incentive now is to keep Tesla’s stock price as high as he can”. He expects the company to announce a share split to buoy the price, and push for a higher credit rating to reduce interest payments.
Although there are few business overlaps — Tesla eschews traditional advertising — analysts and investors warn that Musk’s Twitter ownership still has the potential to hurt the carmaker.
“There’s a big reputational risk from a mishap . . . if Musk gets a negative image and that transfers on to Tesla for a while,” said Philippe Houchois, a car industry analyst at Jefferies who believes it is inevitable that Musk will “upset people”.
In the days since the deal, Musk has fired off several humorous missives, including one saying his next move would be “buying Coca-Cola to put the cocaine back in”.
But he has also targeted individuals, with posts including a meme featuring Twitter’s legal head Vijaya Gadde and a promise to upset one in five users on the most extreme ends of the political spectrum in the name of balance.
One suggestion that has swirled since the deal is that China, which has banned the social media platform, may be able to lean on Tesla, which makes roughly half its cars in the country, to influence rules at Twitter. China’s foreign ministry has dismissed the idea.
Ultimately, even the company’s harshest critics admit the impact on Tesla’s shares, which have soared far higher than the business’s improving fortunes, may be muted.
“Tesla shareholders are very forgiving,” said Chanos. “They may just shrug their shoulders and say, ‘if anyone can do it, Elon Musk can do it,’ and continue to give him the benefit of the doubt.”
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2022-04-29 09:25:11Z
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