Musk Blasts Tech Bro Club at his own risk


Scott Olson

By Breakingviews

How far are Elon Musk and his Twitter adversary (TWTR) willing to go before they mutually agree to cancel their agreement? The boss of Tesla (TSLA) has enlisted a whistleblower complaint in a new effort to drop its $44 billion deal with the social media company. It complicates things for Twitter, but Musk, by hitting former Silicon Valley allies with subpoenas, puts more at stake.

On Monday, Musk’s attorneys sent the social network a second letter terminating the agreement to include allegations from Peiter “Mudge” Zatko, Twitter’s former security chief. He accuses his ex-employer of glaring flaws in his defense against hackers, among other issues. He is now due to testify before Congress in September. Even if Musk’s deal doesn’t materialize, Twitter has more questions to answer.

But Musk’s handling of the deal has drawn many of his friends into the tech industry. Twitter sent subpoenas to Musk’s co-investors in the takeover, including Oracle (ORCL) founder Larry Ellison, who sits on Tesla’s board, and venture capital firm Sequoia. , an investor in Musk’s SpaceX.

He even subpoenaed his friend, Twitter co-founder Jack Dorsey, who had spoken to his fellow entrepreneur about making the social network private. Twitter’s banks, Goldman Sachs (GS) and JPMorgan (JPM), as well as Musk’s finance company, Morgan Stanley (MS), were also served.

Musk might need it later. His main job, running Tesla, depends on his ability to track and secure funding. Tesla’s estimated price-to-earnings ratio over the next 12 months is 52, eight times higher than other automakers including Ford Motor (F) and General Motors (GM), according to Refinitiv. That’s partly because of Tesla’s track record, but Musk also wants to expand Tesla sales to 20 million vehicles a year by 2030.

That’s about 10 times the planned capacity at the end of this year and the largest planned expansion ever by a capital-intensive automaker. The total cost could be $600 billion, including materials, according to a Reuters analysis.

Musk’s friends in Silicon Valley can still participate in one of his new ventures, or an old one. But if they’re worried about receiving a subpoena later and damaging their own reputation, they might think twice.

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.


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