In a high-stakes Christmas Eve showdown, Elon Musk, the visionary CEO of SpaceX and Tesla, successfully secured a crucial lifeline for his electric car company, Tesla, preventing it from sinking into bankruptcy. As per the bombshell biography by the acclaimed journalist and writer Walter Isaacson, the access to which has been granted exclusively to Business Today, amid financial turmoil and heated disagreements with investors, Musk's determination and unconventional tactics saved not only Tesla but also the electric car dream itself.
The Financial Abyss
As December 2008 rolled in, Tesla was on the brink of financial collapse. The company was set to run out of money on Christmas Eve, with neither Tesla nor Musk personally having enough funds to cover the next payroll.
A Desperate Plan
In a desperate bid to raise $20 million in new equity funding to keep Tesla afloat, Musk turned to his existing investors. However, one major investor, VantagePoint Capital led by Alan Salzman, resisted the plan. The success of this equity round depended on unanimous approval from existing investors.
Musk and Salzman had been at odds for months over Tesla's strategic direction. Salzman advocated for Tesla to become a supplier of battery packs to traditional car manufacturers like Chrysler. Musk vehemently disagreed, believing that such a move would be a mistake given the dire state of the legacy car industry.
“Salzman was trying to insist that we hitch our wagon to a legacy car company and I’m like, that ship is literally sinking,” Musk said.
Boardroom Drama
The tension escalated to a point where Salzman attempted to remove Musk as Tesla's CEO during an unofficial board call. Kimbal Musk, Elon's brother and a Tesla board member, vehemently opposed this move and blocked a board vote to oust Elon Musk.
The Critical Meeting
Salzman demanded that Musk visit VantagePoint's offices to outline Tesla's capital needs, a move that further angered Musk. The meeting was scheduled for 7 a.m., a time that did not align with Musk's night owl schedule. Musk felt Salzman was deliberately making things difficult for him.
The Game-Changing Decision
With Tesla's survival hanging by a thread, Musk had no choice but to find a way around Salzman's veto. He restructured the financing plan to avoid issuing more equity and instead taking on more debt. The fate of Tesla rested on a Christmas Eve conference call.
A Tearful Triumph
On that fateful call, VantagePoint, along with other investors, ultimately supported Musk's plan. Overwhelmed by emotion, Musk broke down in tears. This last-minute rescue prevented Tesla from bankruptcy and preserved the electric car dream at a time when major U.S. car companies had abandoned electric vehicle production.
“Had it gone the other way, Tesla would have been dead and maybe too the dream of electric cars for many years. At the time, all of the major U.S. car companies had quit making electric vehicles,” Musk said.
Despite the acrimony between Musk and Salzman, Tesla survived its darkest hour. Salzman, while denying Musk's allegations, acknowledged Musk's role as a driving force behind Tesla's success.
The Current Financials
Tesla reported earnings results for the second quarter ended June 30, 2023. For the second quarter, the company reported sales of $567 million compared to $588 million a year ago.
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