Wall Street Still Charmed by Musk

Wall Street Still Charmed by Musk

As preoccupied as Elon Musk can get with his petty feuds and outlandish side projects (spoiler alert: very), his antics haven’t stopped Tesla Inc. from setting the pace for innovation. The latest piece of whiz-bang gadgetry added to Tesla cars is a diagnostic tool that can sense needed repairs and summon a tow truck when necessary. It even automatically orders replacement parts.

Some investors might wish the company had developed an automated system for replacing rambunctious chief executives while they were at it. But if Musk’s erraticism and penchant for piling up debt have left any stockholders looking to unload their stakes in Tesla, the latest signs from the capital markets indicate they won’t find a shortage of willing buyers.

In a May 8 filing with the Securities and Exchange Commission, the Silicon Valley-based electric car manufacturer revealed it had completed a combined offering of debt and equity for approximately $2.7 billion. The total included $860 million in stock and more than $1.8 billion in convertible notes.

Tesla’s final sum from the offering actually exceeded the initial total of $2.3 billion reported in a prior filing. The increase came after underwriters exercised options to purchase an additional $110 million in stock and $240 million in debt.

As Ars Technica pointed out, the round of fundraising did more for Tesla than simply doubling the company’s cash on hand. It also signified that the disruptive auto manufacturer still has the backing of Wall Street. Which bring us back to Tesla’s mercurial co-founder.

Ironically, the total raised in the offering would just about cover the 10-year compensation package for Musk that was approved by Tesla shareholders last year. The incentive-laden structure of the deal raises some skepticism that Musk, whose net worth is already estimated to be in the tens of billions of dollars, will get the full $2.6 billion potentially available to him – or even most of it. (At least if you ask David Einhorn, who just called some of Musk’s promises “a lot of horse—t.”) Then again, you could argue Musk is starting to build up a hot streak.

In addition to Tesla’s success in the capital markets, Musk reached an agreement last week with the SEC over charges that he was in contempt of a securities fraud settlement from 2018. The latest dispute originated with a statement in February from Musk’s Twitter account – a hotbed of securities law controversies – about Tesla’s production numbers. The terms of the deal announced in April lay out explicit conditions regarding the types of subject matter that Musk must vet with Tesla’s lawyers before he hits the send button.

The settlement drew fire from one SEC commissioner, Robert Jackson, who said it was too lenient. “Given Mr. Musk’s conduct, I cannot support a settlement in which he does not admit what is crystal clear to anyone who has followed this bizarre series of events: Mr. Musk breached the agreement he made last year with the commission,” Jackson said.

Perhaps a majority of Tesla’s investors will tire of Musk’s antics soon enough, too. For now, they seem content with the direction he is taking the company.

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