Elon Musk’s April Fool’s Prank About Tesla Going Bankrupt Was a Real Concern

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Musk told judge Joseph R. Slights III about that in the context of SolarCity’s purchase by Tesla. Shareholders are suing Musk for that deal, accusing him of seeking personal benefit from it. They also claim that he forced Tesla into the agreement and that he is the controlling shareholder despite not owning a majority stake.

The attorney Evan R. Chesler was asking Musk some questions. He is the chairman of Cravath, Swaine & Moore LLP, one of the offices in charge of the Tesla CEO’s defense. Chesler asked Musk if there were any business issues at Tesla following the acquisition of SolarCity, and Musk said this:

“Yes. In 2017, it became apparent that Tesla was in severe trouble with the Model 3 program.”

Elon was found passed out against a Tesla Model 3, surrounded by “Teslaquilla” bottles, the tracks of dried tears still visible on his cheeks.

This is not a forward-looking statement, because, obviously, what’s the point?

Happy New Month! pic.twitter.com/YcouvFz6Y1

— Elon Musk (@elonmusk) April 1, 2018 Tesla bought SolarCity in 2016. Exactly four years ago today, on July 28, 2017, the EV maker delivered the first units of the Model 3. After explaining what this EV was – and praising Tesla once again for being the first automaker to reach mass production after Chrysler in the 1920s – Musk explained what the problems were:

“It is staggeringly difficult to achieve volume production of a car and then to have the cost of that car be less in price is insanely difficult. So we ran headlong into that problem in 2017. There were obviously many, many hedge funds in Wall Street who thought we would not solve that problem, and we were the most shorted stock in the history of the stock market, which is saying something.”

Here, Musk seems to understand why hedge funds were betting against Tesla. His solution to prevent them from making a profit with their short positions made even the chancellor intervene.

“Well, in 2017, once it became apparent that Tesla was in extremely dire straits and at mortal risk – in fact, we were headed for bankruptcy, frankly, at a very high speed – I repurposed everyone at the company, including all the SolarCity personnel, all hands on deck: We’ve got to fix the manufacturing system of the Model 3. And I don’t care what you did before – and, actually, this includes the human resources department, the legal department, the design studio, everyone. Everyone is working on Model 3 production.”

Chesler asked if even the lawyers were involved, and Musk confirmed. Slights III said that it was “a little scary.” The Tesla CEO replied.

“Desperate times call for desperate measures, Your Honor.”

Later, Musk said the years from 2017 to 2019 were the “three hardest years” he has experienced in his life. Again, his “joke” about Tesla going bankrupt was on April 1, 2018. He made fun of being desperate when he indeed was, according to his own words. Summing up, Musk feared his “joke” would prove to be valid until one year after he made it.

Apart from admitting that to the Delaware court, Musk also said on November 3, 2020 – in another tweet – that Tesla almost broke.

Closest we got was about a month. The Model 3 ramp was extreme stress & pain for a long time — from mid 2017 to mid 2019. Production & logistics hell.

— Elon Musk (@elonmusk) November 3, 2020 While the discussion may focus on the fact that Tesla never went bust – which would validate Musk’s “prank” – the truth is that the concern was real. It gave Musk the three worst years of his life, it made short sellers bet against his company, and it may ruin Musk’s defense in the SolarCity trial.

The court may reason that a company in “dire straits” had no reason whatsoever to buy another one: it had more significant problems to solve. It had to sort out the manufacturing of the company’s most important vehicle until that point while the CEO was promising an “alien dreadnought” to market analysts. It is not unlikely that this is what put Tesla “at mortal risk,” as Musk admitted in another tweet.

Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.

— Elon Musk (@elonmusk) April 13, 2018 Jumping the gun seems to be the issue just as much as it has been with the 4680 cells. Musk based all future Tesla products on them while they are still under development. Factories are being built around these batteries, and Musk and Tesla “still have work ahead” to put them into production. If that work extends beyond the predicted start of operations for these factories, what will they do?

The episode raises trust issues as well. Customers and investors may find it difficult to believe a man that tried to pretend a real danger to his company was something to laugh about. Or that 4680 cells will be ready by April 2022, but the German Model Y, based on those batteries, will be produced by the end of 2021. The stories simply do not fit together.

It may be the case that the Tesla CEO clarifies them three years from now – if people are still willing to take his words seriously. For the sake of his company, they should, but the ball is not in their court for a long time already.