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What You Get When You Go Into Business With Elon Musk
September 8, 2023

What You Get When You Go Into Business With Elon Musk

Reading Time: 5 minutes

Approving sketchy loans. Swallowing weird deals. Giving him whatever he wants., Elon Musk got a $1 billion loan from SpaceX. It’s what happens when you do business with him.

Around the time he was buying Twitter last year, Elon Musk borrowed a billion dollars from a different company he owns: SpaceX, which makes rockets. The Wall Street Journal reported on the loan Tuesday and noted that while Musk’s ownership stake in SpaceX is 42 percent, his voting power as of this past march was 79 percent. Nobody could stop him from taking out the loan if he really wanted it, and it’s not clear that anyone tried. SpaceX is in the rocket business, but it’s foremostly in the Musk business.

The loan points to a truth that is becoming quite well established: If you are a shareholder in one of Elon Musk’s companies, you are entangled with the businesses of all of them. Some of that is natural and unavoidable: Musk is one of the most famous people in the world. He is known largely for his business acumen and innovation, although he has become well known in the past year for being kind of a dumbass in his management of Twitter, which he’s since renamed X. Everything Musk does is under a microscope, and his actions at one company can weigh on the fortunes of another company. If you found him obnoxious when he took over Twitter, you might have become less likely to buy a car from Tesla. If you invested in Tesla, you might have had questions about his management of Twitter, or SpaceX, or the Boring Company, and you might have sold shares for that reason.

But the web of Muskiness around all of his companies goes a bit deeper than the reality that Musk is in charge, to some extent or another, of all of them. His management of Company A affects the fate of Company B, and Musk’s success in one business pursuit can plausibly have a lot to do with the success of another. So he might get a lot of things he wants, even if those things don’t seem like they’ll provide much of a benefit to any shareholder of Company B except for, you know, Musk himself. That is not really how it’s supposed to work, at least at public companies like Tesla, where boards of directors are legally meant to look out for the financial interests of shareholders and not, notably, the chief executive. One of Musk’s great successes is that he’s made his empire and himself one and the same to those shareholders, and he has surrounded himself with boards that don’t seem interested in making the distinction.

Musk getting a loan from SpaceX is not that big a deal, insofar as there are bigger Musk business-ethics issues to put on the grill. A very rich guy getting a loan from a private company that he owns nearly half of is not the people’s business. He paid it back quickly and with interest, the Journal reported. Nobody associated with SpaceX lost any money because of it, and if they had, that would be nobody’s problem but theirs. Such is the glory of being a private company. Musk, who doesn’t like Securities and Exchange Commission rules, likely enjoys that it is much harder for financial regulators to make any kind of stink about his activities at SpaceX than it is at Tesla or in his acquisition of a then-public Twitter. (On the other hand, he needs to worry about the pencil pushers at NASA, SpaceX’s biggest client. Remember when he apparently had to keep them happy by drug testing for a year after smoking a blunt on Joe Rogan’s podcast?)

Where it gets weirder is when Musk’s behavior gets more erratic than taking out a loan he quickly pays back, and when he does it at a company with public shareholders. Buying Twitter was a pretty good example. Musk was (and is once again) the wealthiest person in the world, but the vast majority of that wealth is tied up in his stake in Tesla and his other companies. He has more walking-around money than you or I do, but he didn’t have walking-around money to buy Twitter for $44 billion. So banks kicked in a few billion, and Musk found some equity investors to join him, and he went off and bought Twitter.

That wasn’t all of his initial plan, though. Musk first intended to pledge $62.5 billion in Tesla stock as collateral to get his $12.5 billion bank loan. Tesla’s stock lost about a third of its value after that, as investors worried about a few things: Musk was overpaying grossly for Twitter, something that’s only become clearer as he has burned down the company’s value. What if Musk’s performance in that high-profile job led to a loss in investor confidence at Tesla? What if Musk needed more money for Twitter and sold some of his Tesla shares to get it, pushing the price down every time he did? Worst, what if all of this wheeling and dealing led to Tesla’s stock dropping so much that the banks seized Musk’s collateral and sold it, plummeting the price even more? Twitter became a huge problem for Tesla’s shareholders even after Musk ditched that plan because of its obvious downward pressure on his most important business.

Tesla’s business has faced bigger headwinds than Musk’s shenanigans on the internet, and the stock has recovered most (but not all) of the value it lost in the months after Musk first got mixed up with Twitter. To shareholders, the intermingling hasn’t been an asset.

The overlap between what works for Musk and what his big companies decide works for them goes back to at least 2016. That year, Tesla bought a rooftop solar company called SolarCity for $2.6 billion. Musk was SolarCity’s biggest shareholder, and the company appeared to have been facing a liquidity crisis without a viable product to fix it. Tesla, miraculously, then bought SolarCity as it was growing its own energy business. Some Tesla shareholders sued, obviously, on the belief that Musk had used Tesla to bail himself out of a bad stake. A court did not agree with them, and neither Musk nor Tesla had to pay a penalty. We can judge the episode outside of a legal court, though. Did Tesla need to buy a struggling Musk company with billions of shareholder dollars? Of course not. Could it have found better ways to spend $2.6 billion? Probably! Would those ways have angered the person most responsible for public confidence in Tesla’s stock? Probably! Does that create, maybe, a distortedly reasonable case for Tesla’s board of directors to let Musk have a deal he wanted? It’s grim, but … maybe? Musk is not a faceless CEO whom a board could relatively easily throw out on his ass. He is his companies, and they are him, and it’s unfortunate for all involved that these companies have to have boards of directors.

Private company SpaceX deciding to give Musk a billion dollars, which he promptly returned with interest, will not make the hall of fame of Musk’s most ethically iffy business moves. But it does provide another data point that suggests that if Musk wants something enough, the nominal adults at his many companies seem exceedingly unlikely to deny him. What if Musk hadn’t quickly paid back the loan, not because he couldn’t but because he didn’t feel like it? That seems like something he would do, doesn’t it? Would SpaceX’s board have come after him? That would have been awkward. It also would have mainly been amusing, because SpaceX doesn’t have public shareholders to hold a bag if things go wrong. At least not yet.


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