Even a Bankrupt Tesla Could Still Be a Winner
If Tesla, Inc. went bankrupt tomorrow, it would still have served a purpose far more important than making money, columnist Jon Evans suggests in a provocative post this week on TechCrunch.
Evans isn’t quite predicting that outcome, and he won’t necessarily cheer if Tesla disappears. But he’s prepared to celebrate the company’s impact in the marketplace, even if its financial performance never matches its breakthrough ability to innovate.
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Evans’ column was prompted in part by a comment from stock market short-seller Jim Chanos, who describes Tesla as “a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth.” Chanos predicts that Tesla CEO Elon Musk will leave the company by 2020 to concentrate on his space exploration business.
But Evans says that assessment is beside the point.
“We tend to assume that a company’s purpose is to make money for its shareholders, or at least ‘not go bankrupt,’ because money is how we measure success. And this is in fact true of most companies. But it is not true of Tesla,” he writes.
“The purpose of Tesla is not to make money; it is to pioneer fleets of smart, mass-market electric cars, and the infrastructure to support them, and battery technology which is not limited to cars. Making money is ancillary.”
Musk would no doubt like to see Tesla succeed in conventional business terms, Evans adds. “But if he fails to do so, is that really so tragic? For those of us who aren’t shareholders or bondholders, I mean.” If it’s ultimately impossible to roll Tesla’s various innovative products into a conventional, profit-making enterprise, “Musk will have used the capital markets to essentially subsidize Tesla with free money. (And, interestingly, open-source the resulting patents.)” In which case, “more power to him for managing to fund a loss-making investment in what is not so much a car company as it is infrastructure for our shared future.”