Taking Tesla Private Would Save Musk’s Ego at the Company’s Expense
Tesla Inc. CEO Elon Musk recently made waves when he announced he is considering taking the company private. In a new op-ed essay in The Hill, Michigan Ross Professor Erik Gordon argues that it’s unlikely to happen — but even if it does, Tesla won’t be able to seriously compete with “Big Three” automakers General Motors, Ford, and Fiat Chrysler.
“The triumph so heralded by Musk, turning out 5,000 cars that sell for $70,000 by working day and night in a circus tent, is a worthy accomplishment, but at best, it is a quarter of what it takes to keep the Big Three up at night,” Gordon writes. “To be a real threat, Tesla has to mass produce four or five times that many cars and sell them for $35,000.”
That won’t happen if Musk borrows the money to take the company private, Gordon explains: “The newly-private company will be so loaded with debt that it won’t have enough money to buy a new two-person pup tent, much less build new factories.”
Gordon further argues that the move is likely driven by Musk’s personality rather than sound business, since “he spends too much time and attention worrying about the disagreeing fools.”
Erik Gordon is a clinical assistant professor at the University of Michigan Ross School of Business. His interests include entrepreneurship and technology commercialization, venture capital, private equity, mergers and acquisitions, corporate governance, the biomedical industry, IoT, FinTech, and digital and mobile marketing.
Media contact: MichiganRossPR@umich.edu