Tesla Motors Founder and CEO Elon Musk isn’t a man that backs down when facing the press. When the New York Times wrote an error-filled article, Musk lashed out at the author, saying “What is he doing picking on an electric car company? Why would he pick on the little guy who is trying to do good when you’ve got egregious waste of money in the tens of billions occurring in Detroit?” He added “He’s a huge douchebag…and an idiot.” And that was just when a journalist was poking at Tesla. Get into Musk’s personal life and he’ll take off the kid gloves.
Valleywag’s Owen Thomas, now writing for VentureBeat, has for some reason become fascinated with Musk’s personal life and continues to write about the man’s marital woes. He’s called Musk a liar on multiple occasions and seems delighted to get into the sordid details of Musk’s divorce. Musk wrote his side of things on the Huffington Post. Thomas hit him again.
Musk is now responding yet again, below. What bothers me about this exchange is that Silicon Valley press, VentureBeat in particular, is so focused on an entrepreneur’s personal life. A divorce isn’t anything that our readers want to know about. This isn’t Hollywood and these individuals aren’t out there trying to get lots of press about their personal lives. If they were, they’d hire agents and publicists and make the best of it. Instead they are focused on imagining and building the future. There’s no place in our community for these kinds of attacks. VentureBeat should apologize and move on, and let Tesla continue to disrupt the car industry.
Below is Musk’s response:
Why Owen Thomas is Silicon Valley’s Jayson Blair
The latest article by Owen Thomas, “Tesla CEO can’t handle the truth”, continues his damaging and fraudulent crusade against Tesla and me personally. Tesla has received a great deal of press, both positive and negative, but it is amazing how much of the truly negative press can be traced directly back to one man.
Despite numerous successes at both Tesla and SpaceX, Thomas has never once written a positive article about either company. Every one of the dozens of stories he has written – without a single exception – has been a nasty hit piece. Even if all those stories were factually correct, and they certainly were not, he has still fundamentally misled the public about my companies by failing to provide even a token number of positive articles. Lying by omission is still lying.
Responding below under similar headings Thomas uses in his article, I address the inaccuracies in his latest article, where he again lies with great conviction. It is impossible to stop Owen from continuing to write such erroneous garbage, but, as I do not have the time or inclination to refute all bad reporting on his part, I would like it known that nothing he writes is remotely objective. Any future articles written by Owen Thomas should be viewed with this in mind.
Tesla IPO Filings
Thomas says “Tesla updated its IPO filings to acknowledge substantially all of the concerns we [ie Owen Thomas] raised as potential risk factors investors should consider”.
We updated our IPO filings simply to state that what Thomas had written had no basis in fact. Since Tesla was in the IPO quiet period, we could not respond directly with a press release. Instead, we had to update the IPO documents to assure investors that what Thomas had stated about Tesla being reliant on me for funding or there being a DOE loan default risk related to my divorce were both false.
Even without the IPO proceeds, Tesla has enough funding from its many venture investors, Daimler and the DOE to complete the Model S with no financial help from me. The reason for the IPO was to provide cash for additional new developments and a small percentage of liquidity for long time shareholders, including me (I sold 5% of my holdings). If this had been a real issue, it would have been placed in the IPO prospectus by the bankers and lawyers long before Owen Thomas raised it.
This is one of many situations where he created a real problem for Tesla out of thin air by writing a misleading article.
My Personal Spending
In his section entitled “Musk’s personal spending”, Thomas does some creative math to claim that one of my “whoppers” is that I suggest I’m spending $30k per month, excluding legal fees. This is completely made up. I never state that anywhere in my piece, nor can it be computed from a collection of my other statements.
Thomas intentionally conflates a statement I make about the average of what I’ve been forced to spend on divorce lawyers over the past two years and my household expenses last year, ignoring the fact that a huge portion of the legal expenses occurred this year in the run up to trial.
Founding of Tesla Motors
Here Thomas relates an anecdote about a serious issue Tesla had with Martin Eberhard, one of the cofounders of the company. Eberhard filed a lawsuit against Tesla (and me) that was filled with inaccuracies.
Tesla was going to file a counter suit, but before we filed, Eberhard and I settled our differences with a few hours of mediation. I’m glad that we made peace. The result obviously satisfied both Eberhard and me or it wouldn’t have been settled. However, Thomas quotes Eberhard’s lawyer as though this was a one sided victory. He could just as easily have quoted my lawyer who would have made the same statement.
What Thomas forgets to mention is that Eberhard was forced to withdraw his lawsuit weeks before the mediation even began. If Eberhard’s position had been strong, he would not have had to withdraw his claims unilaterally well before mediation started.
The Safety of Customer Deposits
Thomas states that I both told customers that I would personally back their vehicle deposits and that I said their deposits were at risk. He is again intentionally conflating facts to make it sound as though I had contradicted myself.
Here is how Owen Thomas once again misleads the reader: the statements are actually referring to different vehicles at very different stages of maturity, but he pulls each quote out of context and pretends they refer to the same thing. When I said that I would back customer deposits personally, which I did directly to customers on several occasions as well as in a Car & Driver article, that was clearly and explicitly regarding the Roadster.
I knew that my resources, combined with Tesla’s, would be enough to pay them back personally if need be. Moreover, Tesla had not been sufficiently clear with customers in the early days that the Roadster deposits were at risk. It would not be right for customers to have those funds at risk without their explicit consent.
On the other hand, the statement I made to Claire Cain Miller of the New York Times at the Model S launch specifically and clearly referred to the Model S reservations. I knew that my and Tesla’s resources could not also cover the Model S deposits in a worst case situation. However, unlike with Roadster, we were very explicit that Model S reservation dollars were at risk and that the funds would be put to use doing advance development of the vehicle.
In this section, Thomas also says that I announced that a Tesla financing round had closed in November 2008, when it actually closed in March 2009. Whether intentionally or not, he is getting the dates confused between when the financing round documents were signed (representing firm commitments), which was actually December 2008, and when the last of the cash was wired in, which was March 2009. This is common in complex financial rounds with a large number of participants.
My History as an Entrepreneur
In this section, Thomas casts aspersions on both Zip2 and PayPal, my first two companies, talking about management changes that occurred at both and not acknowledging one positive thing about either company. The reality is that Zip2 (which I started at age 23) sold for over $300M to Compaq and PayPal sold to eBay for over $1.5B after going public. Anyone reading Thomas’s twisted account of their history without knowing better would think that both were failures.
It is worth noting that of the five companies that I’ve been a key part of creating (Zip2, PayPal, SpaceX, Tesla and SolarCity) over the past fifteen years, every round at every company has been an up round, even in the worst of all market conditions. In other words, no matter whether you were a series A, B, C, D, etc investor, you always made money. With a public company, there are of course significant short term fluctuations in share price, but those investors that believe in a long term hold strategy should be comforted by this track record.
Thomas also falsely states that I’m alienated from the rest of the management team at PayPal and have a completely different version of history to them. In reality, Peter Thiel, who replaced me as CEO of PayPal, later became one of the biggest investors in SpaceX. Max Levchin (PayPal CTO), Peter Thiel, David Sacks (PayPal COO) and I produced a movie together soon after we worked together at PayPal. There are half a dozen other ventures involving me and several other members of the PayPal management team.
Thomas references another NY Times Miller article about an email I wrote to customers and claims I said Tesla would start getting DOE funds in four to five months.
What I actually said was that the DOE had told me to expect funds disbursement in four to five months. This was absolutely true. In the end, it took the DOE six months longer than they themselves expected, since the ATVM loan program was brand new.
In any event, Thomas bizarrely manages to create a fake negative story out of what was actually a huge victory for Tesla. We were selected as the first winners of the Advanced Technology Vehicle Manufacturing program, along with Ford and Nissan. One of the requirements of this program was that you had to demonstrate that you were a viable ongoing business and that you had a compelling technology and business model for the funds sought.
This is completely different from the auto bailout program for GM and Chrysler, although many in the media confused the programs. In fact, the reason that GM and Chrysler were excluded from the ATVM program, is that they were going through bankruptcy and therefore obviously failed the requirement to have a viable ongoing business.
Thomas falsely states that Tesla wasn’t profitable last year, even though I said it would be. In fact, Tesla was profitable in 2009, albeit only for the month of July. That’s the best we could do, given the ramp up in Model S expenses, but nonetheless it was an important symbolic victory. If all Tesla did was focus on being a small sports car company and sell powertrain technology, it would still be profitable today, as both businesses generate a good margin.
However, my goal from the beginning has been to make electric cars that anyone can afford (Model S is step two in that process, not the end game), which requires a huge expansion in production. We are trying to go from about 500 Roadsters per year to 20,000 Model S vehicles. In other words, production is intended to be 4,000% of what it is today in only a few years time. There is just no way to remain profitable with that level of growth and capital expenditure.
Regarding Car & Driver quoting me as saying that GE would be an investor, that was an error on my part that was corrected as soon as C&D published. The C&D interview occurred a few months earlier when GE had confirmed via email that they would be investing. Then GE had some sort of internal crisis and pulled out at the thirteenth hour (they had asked us to extend the closing deadline to allow them to participate), which was unfortunate for them. Their investment would have done incredibly well.
Thomas pointedly ignores actual Tesla investors. In addition to the excellent venture investors of Valor Equity, DFJ, Technology Partners and others, there is Daimler and Toyota. Daimler invested $50M in Tesla after working with us for a year on the electric Smart car and doing extremely detailed technical and financial due diligence. When we did another investment round late last year with ADWEA and Fjord Capital, they invested again. When we did the IPO, they didn’t sell a single share, despite having a roughly threefold return on investment.
The Toyota Deal
Thomas states that although Toyota and Tesla announced that they would be developing a vehicle together, the SEC filings done right after the press conference say that we have no written agreement and there is no guarantee that we will get one done. Therefore, he concludes that I (and presumably Akio Toyoda), were misleading the public at the press conference!
Thomas actually knows better, but, for those who aren’t familiar with the requirements of an IPO prospectus (aka S-1), you always have to state the worst case scenario. This is done for liability protection, but is definitely not what is actually expected to occur.
Anyone who thinks that Akio Toyoda, the president of Toyota, would give a major public speech in front of the governor of California about doing a joint electric vehicle project with Tesla and not follow through is a complete fool. As was announced last week in Japan by Toyota, we have now signed the agreement and will be delivering the first prototypes this month. The vehicle and details of the program will be unveiled at another event later this year.
Despite Toyota’s recent troubles, they are still the largest car company in the world and by far the leader in hybrid electric vehicles. For them to have invested in Tesla, (moreover at the IPO price) and want to partner with us to produce a vehicle is a great honor and a powerful endorsement.
Purchasing the NUMMI plant for $42M, which has the ability to manufacture half a million vehicles per year or almost 1% of global automotive production, and making that our Tesla factory is another valuable element of the relationship. I should mention that NUMMI was owned half by Toyota and half by the General Motors spinoff (Motors Liquidation Corp), so we owe them a debt of appreciation too.
The main reason I love this factory is that it accelerates our ability to produce an affordable mass market car. The Model S platform will at most consume 50k to 100k of the NUMMI capacity. The remainder of the plant will be sectioned off until we can bring our high volume affordable electric car to market, which has always been my dream for Tesla.