Musk’s Twitter deal could put Tesla’s chief bank to the test

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Tesla is big or bigger than the world’s largest companies, but it doesn’t have the management infrastructure of other companies, investors stress

Tesla is big or bigger than the world’s largest companies, but it doesn’t have the management infrastructure of other companies, investors stress

Elon Musk’s move to buy Twitter for $44 billion has raised concerns about the depth of leadership talent at his more valuable company, electric carmaker Tesla Inc., if his attention is further shared through the social media platform.

Announcing the deal on Monday, Mr Musk called Twitter the world’s “digital marketplace” and spoke about protecting freedom of expression, but he also reignited fears from a man who once admitted he was during the launch of the Model 3 sedan in Having slept on the factory floor and talked about working “crazy hours” last year only has so much energy left.

“Tesla feels a lot like a start-up even though it’s a trillion-dollar company,” said Tesla investor Ross Gerber, chief executive of asset management firm Gerber Kawasaki. “It’s as big or bigger than the largest companies in the world, but it doesn’t have the management infrastructure that other companies have.”

Additionally, Tesla is scrambling to ramp up production at new plants in Texas and Berlin amid supply chain crunches and higher raw material costs, and to get work back on track at its largest factory in Shanghai amid a spike in COVID-19 cases there. Mr. Musk said in January Tesla had too much on its plate and wouldn’t introduce new models like Cybertruck this year.

Tesla has managed to pull through its woes, but a stronger pull of its focus through Twitter is worrying investors.

“I’m afraid that will be distracting,” said a fund manager with a significant position at Tesla, who asked not to be named. “He’s juggling supply chains and factory delays and expanding the energy storage business and it doesn’t add up at all.”

Tesla’s shares are down 8% since Musk first announced his initial stake in Twitter.

Tesla could not be reached for comment, but a company insider who asked not to be identified said investors’ concerns were “overstated” and that Mr Musk is still heavily invested in the automaker.

Mr. Musk also runs rocket company SpaceX, as well as brain-chip start-up Neuralink and tunneling company The Boring Company.

Tesla has seen leadership changes before, with the departure of co-founder JB Straubel in 2019 and President Jerome Guillen last year.

Tesla, founded in 2003, has become the most valuable automaker, but the company’s website lists only two executives on its leadership team besides Mr. Musk, compared to 17 at General Motors and 11 at Volkswagen.

Tesla’s current high-profile leadership outside of Musk includes Chief Financial Officer Zachary Kirkhorn and Senior Vice President Andrew Baglino, who is responsible for powertrain development. Both are known to investors from their appearances on Tesla’s quarterly conference calls.

Robert Pavlik, a senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, which owns a limited number of Tesla shares in accounts he manages, wondered if Musk would just put someone else to run Twitter.

“It seems like the most logical thing to do,” he said. “It seems like he has his hands full with Tesla and SpaceX.”

Mr. Gerber said maybe Mr. Musk needs a strong No. 2 executive like he has at SpaceX with President Gwynne Shotwell.

Ian Beavis, chief strategy officer at auto consultancy AMCI, fears Mr Musk’s purchase of Twitter, with its controversy over political and social issues, could even damage the Tesla brand.

Some investors remain concerned about Mr. Musk, who is valued at $268 billion according to Forbes, plans to fund the Twitter deal. Twitter said Mr Musk has secured $25.5 billion in debt and margin loan financing and provided $21 billion in equity. It’s unclear if Mr Musk will sell Tesla shares to fund the deal.

Mr. Musk holds 172.6 million shares of Tesla and has already pledged about half of his shares, according to Tesla filings. If he posts more shares as collateral to secure $12.5 billion in margin loans, he may be left with around 30 million unpledged shares, according to a Reuters calculation.

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