It started with a bombshell tweet during market hours, and ended with a stunning blog post late Friday night.
Elon Musk's decision to scrap a plan to take Tesla Inc. private, while ending speculation about how the billionaire would raise the billions needed, still leaves many questions about where he and the electric-car maker go from here.
Leaving ownership as is puts the scrutiny back on Musk's all-consuming work style, the company's cash position, its ability to meet mass-market production goals, and the independence and oversight of Tesla's board of directors. Also front and center is an investigation by the U.S. Securities and Exchange Commission.
“What Musk wrote Friday night contradicts everything he tweeted earlier," analyst Gene Munster of Loup Ventures said Saturday.
“Eventually this will blow over, but it's going to take at least six months,” Munster said. “This is not a situation where we can just forget about it. It's created a new layer of questions for investors. And now Tesla needs to get back to basics, which is ramping Model 3 production and profitability."
On Aug. 7, Musk tweeted that "investor support is confirmed" for his idea to take Tesla private at $420 a share. He said in another tweet earlier that day that he had “funding secured,” sending the shares soaring before it became apparent he didn't have financing lined up, prompting a spate of securities lawsuits from shareholders and a subpoena from the SEC.
Two and a half weeks later, on Aug. 25, he wrote that shareholders had essentially told him ‘please don't do this,' even as he reiterated he could secure the funding. In a tweet Saturday, he said the transaction would have required an “exotic trust structure that would prob not be accepted by regulators."
Musk's behavior in the interim, including a tearful interview with The New York Times that touched on his lack of sleep, has led to calls for Tesla to hire a chief operating officer to help reduce stress on the CEO. Musk, who also runs the rocket-launching company SpaceX and a tunnel-drilling outfit called the Boring Co., is busy trying to ramp up Tesla's production of the Model 3 and make the company profitable in the second half of the year.
While the board of directors said in a separate statement that “we fully support Elon" and his decision to back off the going-private idea, corporate-governance expert Stephen Diamond said the board probably leaned on Musk to back down.
“My guess is that the large institutional investors said to Elon ‘this all sounds a little half-baked',” said Diamond, an associate professor of law at Santa Clara University. “The board called his bluff. The clock was ticking on the class period of all of these shareholder lawsuits. Hiring Goldman Sachs and Morgan Stanley gave Musk cover, but they had to cut off the damage and end the charade.”
In an Aug. 13 blog post, Musk indicated that he believed based on conversations with Saudi Arabia's Public Investment Fund that he had financial support to go private. In his post Friday, Musk reiterated his “belief that there is more than enough funding to take Tesla private” but said a transaction would be distracting and take too long.
The next measure of how Tesla bounces back may come in early October, when it will report third quarter production and deliveries. The company has said it expects to make 50,000 to 55,000 Model 3s in the quarter, which averages to roughly 4,200 vehicles a week at the higher end of the guidance.
Tesla's sales were down 15 percent to 40 percent in European markets during the first half of 2018, hurt by more competition for environmentally advanced vehicles, said Gordon Johnson, an analyst with Vertical Group.
Johnson, who has a sell rating on the shares and a price target of $88, said Tesla is also seeing revenue from selling federal tax credits dry up as other companies build more electric vehicles.
The SEC staff will continue to look at Musk's initial tweets given their market impact, said Stephen Crimmins, a former commission enforcement attorney now in private practice at Murphy & McGonigle in New York.
“The critical point is the time the statement was made, and later events or clarification will not wipe out the SEC's interest in a matter,” Crimmins said.
The SEC investigation and lawsuits will at minimum continue to divert management's time from operations, and Musk's exhaustion is the “most critical near-term concern" for Tesla given the need for consistent execution on the Model 3, said Joel Levington, a senior credit analyst with Bloomberg Intelligence.
"The board is going to be seriously tested,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “You can't go through all of this drama and then say ‘never mind.'"