Tesla CEO Elon Musk made waves yet again this week, with a tweet suggesting that he would be taking Tesla private. In an email to employees, subsequently posted on the company's blog, he wrote, "This is all about creating the environment for Tesla to operate best. As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla."
Musk's unexpected announcement raises a whole host of questions, but one of the most resonant for the startup-laden mobility technology sector is: Do public markets hurt new mobility companies with volatility, disclosure and scrutiny as much as they help by providing access to huge amounts of capital?
A blog post this week by Automotive News' Richard Truett adds a provocative wrinkle to this question. While speaking with executives at the Center for Automotive Research Management Briefing Seminars last week, he tried to find one brave enough to admit what many inside the autonomous sector say privately: The peak of autonomous drive technology hype has passed, and viable business models are farther off than fevered anticipation suggests. Though they said as much off the record, their public statements remain resolutely optimistic out of fear of the market punishing their stock price in response to dialed-back expectations.
This suggests a problem that is similar to the one Musk brought up. Once a vision of the future has been sold to markets, it can take on a life of its own. The stock market doesn't have the patience to weather the inevitable ups and downs that come with disruptive technologies.
It's understandable that Musk would want to avoid the kind of fall from grace that keeps other executives making more rosy statements than they do off the record, and perhaps going private could help accomplish that. On the other hand, markets need to reflect reality, not just fantasy. Overpromising needs to carry consequences if markets are to function properly.
Yet if acknowledging reality has become a taboo and markets trade only in positive fantasy, there is a systemic problem forming that could be far more damaging than a correction in any one company.
-- Edward Niedermeyer