Yesterday’s revelation that Elon Musk has been sued by the SEC for securities fraud based on his errant “funding secured” tweet is a real bombshell. But what is truly damning about the story is that Musk had a deal on the table that let him and Tesla off the hook and he rejected it out of what can only be described as moral vanity. In my previous post outlining my admiration of Musk’s abilities and my trepidation at his managerial behavior, I identified a disconnect at the core of Tesla as an investment.

The fact that he had a very generous deal from the SEC and that he couldn’t bring himself to agree to it for the benefit of Tesla, its employees, its shareholders, and its customers just shows that nothing matters more to Elon than his own ego and sense of himself as never having made a mistake. This is very selfish and poor judgment that calls into question his mental stability.

He may escape this compound disaster of his own making, but in my mind he has further disqualified himself from being CEO of a public company. Either he cannot see that what he did was wrong, in which case he is delusional and should not be trusted in such a position, or he thinks he is above the law and his brilliance excuses his horrible temperament and behavior. In any case, I stand affirmed in my judgment that Elon Musk cannot and should not be trusted with my capital, particularly without some serious adult supervision. He is just too unreliable.

That his fanboys cultists are incapable of seeing his flaws and acting accordingly also brings into sharp relief their own poor judgment. Houdini may escape this trap, but he needs serious help, both psychological and operational. And he needs to be reined in. Those enabling and egging on his aberrant and destructive behavior are not doing him or his company any favors.

See also:

The Importance of Intangible Assets — Bill Nygren

Howard Mark’s Latest Memo: The Seven Worst Words in the World

Beware of Leveraged Loans as the Riskiest Lending Has Migrated to BDCs and Alternative Lenders: Caveat Emptor

U.S. Farm Sector Braces For Protracted Trade Fight

“Investing is the intersection of economics and psychology.”
— Seth Klarman