Musk says quarterly profits are hindering Tesla's long-term goals

Signal of change / Musk says quarterly profits are hindering Tesla's long-term goals

By Jordan McKay / 16 Aug 2018

On August 7, enigmatic CEO Elon Musk revealed his intent to take the publicly-traded electric vehicle company, Tesla, private.  In his statement to Tesla shareholders Musk cited, “wild swings in our stock price”, and “quarterly earning cycles that put enormous pressure on Tesla,” as reasons for his interest in taking the company private. Musk went on to publish a further explanation of the potential privatisation saying, “I’m considering taking Tesla private because I believe it could be good for our shareholders, enable Tesla to operate at its best, and advance our mission of accelerating the transition to sustainable energy”.  Musk has since backtracked and stated he intends to keep Tesla public, following feedback from shareholders.  

 

So what?

Tesla’s stated mission is to accelerate the world’s transition to sustainable energy, and in service of that goal, it has disrupted one of the most entrenched markets in the world; the automobile market.  To do this has required massive investment and skilled relationship management with funders and the public, but since Tesla’s IPO in 2010 shareholders and the board of directors have assumed greater control of the company.  

With Musk citing quarterly earning cycles as difficult to reconcile with his and the company’s long term objectives — what message does this send to other visionaries and disruptors?  Is it impossible to strategically plan, fund, and manage a public company with long term systemic change as its mission? How are other future-oriented firms like Apple and Alphabet handling this dichotomy? Despite Musk's decision to keep Tesla as a publicy-traded company, will his public criticism of the short-term orientation of our public markets encourage other firms to consider alternative funding and management strategies when considering going public?   

 

Sources

https://www.tesla.com/blog/update-taking-tesla-private

What might the implications of this be? What related signals of change have you seen?

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