Being the CEO of a publicly-listed company is a tough job. There are many rules a CEO has to follow to keep in line with securities laws. But the rules don’t seem to apply to Tesla (NASDAQ:TSLA) CEO Elon Musk as he has been able to get away with countless lies with impunity.
Tesla cultists rationalize Musk’s lies by claiming he’s “too optimistic.” An objective look at Musk’s past statements would tell you that many of his claims are blatant lies.
Tesla decided to raise $2 billion in cash through a stock offering Thursday. The decision came just two weeks after Musk said it doesn’t make sense for Tesla to raise more capital.
It’s possible that Tesla’s increasing valuation changed Musk’s mind. With the stock trading at sky-high levels, raising money by diluting existing shareholders is a financially wise decision.
But there are several reasons why Musk shouldn’t be given the benefit of the doubt here.
It was evident that Tesla would need to dip into the capital markets to raise cash soon. As I had previously opined, the company never had enough money on its balance sheet to fund its product pipeline.
Funding the Cybertruck, Robo-taxi, Model Y and meeting debt obligations would have required a lot more money than the $6.27 billion the company had on its balance sheet .
So did Musk not know this? Of course he did. He’s the CEO. Yet he went ahead and claimed raising money doesn’t make sense.
If there’s one thing Musk has repeatedly lied about, it’s Tesla’s profitability and self-sustainability. Tesla has never been a self-sustainable company. Ever since the company went public, it has reported losses every year and has relied on the capital markets to plug the holes in its balance sheet.
That has never stopped Musk from claiming Tesla will never need to raise more capital. It seems to be one of his favorite lies.
Back in 2011, when Musk was quizzed about Tesla’s cash position and liquidity , he said:
Tesla does not need to ever raise another funding round.
Then Tesla went ahead and raised $195 million just a few months later.
The most egregious of the lies came in 2019. After Tesla posted its first-ever consecutive quarterly profits, Musk claimed on the earnings call the company will sustain its profitability :
Not by a lot, but I am optimistic about being profitable in Q1 and all quarters going forward.
Keep in mind the conference call took place one month into the first quarter. Just a few weeks later, Tesla reported a massive loss of $702 million .
So was Musk so short-sighted that he couldn’t foresee a huge loss after one-third of the quarter had already passed? It’s highly unlikely.
If you consider the following email that Musk sent to a former employee just a few days after the fourth-quarter earnings call, it becomes evident that Musk was indeed lying.
Musk’s lies have gotten more egregious ever since he got a slap on the wrist for the “funding secured” fiasco. A CEO being allowed to lie with impunity hurts the capital markets by setting the wrong precedent.
So for the sake of the capital markets and Tesla, Musk needs to stop.