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Tesla layoffs add to Elon Musk’s woes

Within the past two weeks, three different companies created by Elon Musk have parted ways with portions of their staff—although the cuts were much less severe at one of the billionaire’s offspring.

Last Friday, Musk announced in an email to workers at Tesla that the electric automaker would be laying off about 7% of its staff; the same day, Musk’s The Boring Company tunnel-building startup fired five employees for performance reasons, out of about 80 overall workers. Those moves came about a week after space exploration giant SpaceX revealed plans for about 600 layoffs, or 10% of its staff, per Reuters.

The reductions at Tesla come after a 30% employee increase during the past year, per an internal email sent by Musk and obtained by CNBC. Despite now having fewer workers, Musk also wrote that Tesla must increase both the production rate and quality of its Model 3s, saying there “isn’t any other way” to be “a viable company.” The personnel changes at The Boring Company were not part of any cost-cutting move, again according to Recode.

SpaceX recently reached a private valuation of more than $30 billion, making it one of the most valuable VC-backed companies in the US, while Tesla has been publicly traded since 2010. Musk, meanwhile, has reportedly poured more than $100 million of his own cash into The Boring Company.

Together, the three companies demonstrate the stunning depth of their founder’s ambitions, his commitment to achieving them, and the strange (sometimes juvenile, sometimes illegal) ways he will go about attempting to do so. You can probably count on one hand the number of other entrepreneurs who would devote such enormous resources to moonshots like space travel, electric cars and large-scale infrastructure. But it’s difficult to imagine Richard Branson, Jeff Bezos or one of those other billionaire few attempting to fund their goals by selling flamethrowers for the everyman, or becoming entangled in a very expensive brouhaha with the SEC because they were trying to make their pop-star girlfriend laugh at a marijuana joke.

In pure business terms, though, it perhaps makes sense that companies with such unique and far-reaching goals might be more prone than some of their peers to boom-and-bust cycles of hiring and firing. No other company has ever done what Tesla and SpaceX are trying to do, so both businesses are largely building their own road maps. That said: It’s highly unfortunate that some of the detours on those maps include people losing their jobs.

 

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Elon Musk, John Flannery hit by shake-ups at Tesla, GE

Whether it’s a company that became an icon of the 20th century or one that hopes to do the same for the 21st, it’s been a bad past few days to be the leader of a multibillion-dollar business.

Elon Musk’s self-created fiasco with US regulators came to a dramatic head over the weekend, as the Tesla founder reached a settlement with the SEC that calls for him to step down as chairman of the electric automaker for at least three years and to pay a $20 million fine. Musk will remain CEO, however, a role that would have been in doubt if Musk had forgone a settlement and decided to battle the SEC, which officially filed suit against him late last week.

GE, meanwhile, announced on Monday the unexpected removal of John Flannery from the CEO role after just over a year on the job, with board member Larry Culp taking over as both CEO and chairman. The ouster comes several months after GE revealed falling profits driven by struggles in its power division, and amid talks of splitting up the company and a months-long decline in its stock price.

In some ways, the departures couldn’t be more different. Tesla is Musk’s baby, and the extremely close association between company and creator has been a major factor driving years of investor excitement in the innovative automaker. It’s difficult to think of one and not the other—even if Musk’s erratic behavior in recent months has perhaps brought into question whether that’s a good thing.

Flannery, meanwhile, was brought in last June to assume control of an aging empire from longtime CEO Jeff Immelt, who in turn had taken the reins from legendary leader Jack Welch in 2001. For a company that traces its roots to Thomas Edison and JP Morgan, it was perhaps too easy to think of Flannery as just another cog in the machine, the latest leader with a generic four-letter name that starts with a J.

For both companies, though, the immediate returns from the moves were positive. Stock in Tesla (NASDAQ: TSLA) shot up more than 16% on Monday, gaining back the losses it recorded last week after the SEC’s lawsuit became public—although surely part of that boost was due to a promising report released Monday regarding the production of Tesla’s Model 3. Shares of GE (NYSE: GE), meanwhile, opened Monday up some 15% before settling back to a more modest 7% increase.

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Saudi Arabia pledges $1B+ to Lucid instead of backing Tesla

The Public Investment Fund of Saudi Arabia (PIF) has agreed to invest more than $1 billion in Lucid Motors, a Newark, CA-based electric car company planning to launch its first commercial vehicle, the Lucid Air luxury sedan, in 2020. Lucid will use the cash for several purposes, including to finish developing and begin production on the Air, build a factory in Arizona and launch its North American retail strategy. The startup has raised prior VC funding from Venrock and Tsing Capital.

Image result for lucid

The announcement comes about a month after reports of an investment first emerged, which in turn came days after several reports connecting the PIF to a possible deal with Tesla. The Lucid transaction falls in line with the PIF’s forward-looking plan called Vision 2030, which calls for the kingdom to pursue investments that will lessen its dependence on oil.

To that end, the PIF has been liberal in dispensing parts of its $230 billion in AUM. In 2017 alone, the wealth fund announced its intent to commit up to $20 billion to Blackstone’s planned $40 billion infrastructure fund, up to $45 billion to a SoftBank-led tech fund, and an unspecified amount toward a proposed $500 billion project to build a new city called Neom on the coast of the Red Sea. To help fund such large-scale transactions, the PIF announced on Monday that it has raised $11 billion through a syndicated loan that it plans to use for general investment purposes.

The latest news would seem to erase the possibility that the PIF has immediate plans to expand its current 5% stake in Tesla, a move that seemed much more likely when CEO Elon Musk tweeted last month that he had “funding secured” to take Tesla private. Musk since retracted his statements about taking Tesla private and is now under SEC investigation.

 

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Saudi wealth fund weighing $1B investment in Tesla rival

After an especially tumultuous couple of weeks for Tesla, Elon Musk’s potential buyout partner is apparently looking to obtain a majority stake in another electric car company.

The Public Investment Fund of Saudi Arabia is considering an investment in Lucid Motors, a Newark, CA-based electric car maker, that could total more than $1 billion and give the fund ownership of the company, according to Reuters.

Under the terms of the agreement, the Saudi Arabian sovereign wealth fund, which manages some $250 billion, would reportedly provide an initial investment of $500 million, then make two subsequent investments if Lucid hits certain production targets.

Founded in 2007 by former Oracle executive Sam Weng and former Tesla vice president Bernard Tse, Lucid is backed by VCs including Venrock and Tsing Capital. Unlike Tesla, the company has yet to release any cars on the open markets. But last year, Lucid unveiled a prototype sedan, Lucid Air, which has 400 horsepower and a starting price of $60,000. The car is expected to ship sometime in 2019.

The potential Saudi Arabia PIF-Lucid partnership could be problematic for Musk, who already appears stressed. Last week, the billionaire entrepreneur gave an interview with The New York Times in which he alternated between laughing and crying while detailing the pressures of running Tesla.

The latest controversy came when Musk himself tweeted earlier this month that he planned to take the business private for $420 per share, or about $72 billion, noting that funding was secured.

Musk later clarified in a blog post that the Saudi Arabia wealth fund, which owns a 5% stake in Tesla, was the potential backer, though no formal agreement had been made. The company is now reportedly facing a subpoena from the SEC and lawsuits from investors that allege Musk’s tweet aimed to inflate the company’s stock price. Tesla stock initially dipped Monday before closing the afternoon up just about 1% at $308.44 per share.

 

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