Wheels are coming off for Musk

Suddenly Elon Musk loves public markets again. On Friday night, the Tesla CEO confirmed the inevitable: he would abandon an attempt to take the electric carmaker private. Investors had already sensed this was going to happen. Since Musk announced his initial “funding secured” bid for $420 a share on August 7, Tesla shares have traded down to just about $320, signalling little confidence that he could get a deal done.

But the charade of the past three weeks, however fascinating for neutral observers, should outrage Tesla shareholders. Musk’s antics, particularly on social media, are unbecoming of the head of a public company, especially one with so many operational challenges. If he wanted Tesla to be private, that is a perfectly acceptable view to take. The company’s $55bn market capitalisation is underpinned by the belief that electric vehicles will gain broad market acceptance in the next decade. As such, quarterly fluctuations in production and profit do not matter much (as long as the company can meet its interest payments).

But when Musk announced his offer, he indicated he had a deal and a structure in place. In fact, he did not even have advisers helping him. He wrote on Friday that going private would be “more time-consuming and distracting than initially anticipated”, noting that there was no real way for shareholders to participate in a private Tesla. Musk has created a distraction, opening himself not only to a regulatory investigation but investor lawsuits as well.

A private Tesla with a handful of investors would have imposed a new level of scrutiny. At present that task falls to independent directors of the board, who seem to have little interest in reining in the CEO.

Tesla added two new independent directors in 2017, after a ruling in a shareholder lawsuit prompted by the acquisition of SolarCity found the board, whose job was to represent public shareholders, was too cosy with Musk. It is still too cosy. Tesla may be staying public but the CEO needs stronger controls around him. London, August 27