These are troubling times for Elon Musk.
Last week, Tesla, his electric car manufacturer, announced the company’s latest round of bad financial news; for the fourth quarter of 2016, Tesla lost 69 cents a share, a larger loss than Wall Street analysts had expected. Even more troubling, Chief Financial Officer Jason Wheeler announced he would step down in April, continuing a trend of, according to one financial outlet, “executives….leaving the company in droves.” With Tesla looking at more financial losses in the future, Musk revealed that to avoid getting “close to the edge,” which would “probably not be the best thing for shareholders,” he intended to raise additional capital — yet again.
Musk may need the money if the United Auto Workers gets its way and organizes Tesla’s currently nonunionized workers — a move vehemently opposed by Musk, who has gone so far as to denounce one Tesla worker’s allegation that he and his fellow employees sometimes face unsafe working conditions as “morally outrageous.” Musk’s comment offended some progressives. Then again, ever since the election in November, the left has been disturbed by Musk’s apparent deference to President Trump. It was bad enough when Musk, whose supporters often view him as the foremost stalwart of a green, sustainable future, endorsed Rex Tillerson, the former CEO of Exxon Mobil, as secretary of state. But Musk’s willingness to serve on two presidential committees, the President’s Strategic and Policy Forum and the President’s Manufacturing Jobs Initiative, is seen as an outright betrayal.
Progressives have also been horrified by Musk’s defense of some of Trump’s more troubling actions. “I was one of your largest supporters until this tweet,” one Twitter follower tweeted to Musk, referring to the defense of the legal system he made as part of what the left saw as Musk’s initial tepid response to Trump’s controversial travel ban. Some have called for Musk to follow the lead of Silicon Valley bigwigs like Uber CEO Travis Kalanick, who resigned from the presidential policy forum after 200,000 Uber users deleted their accounts, and stop advising Trump. “It is becoming clearer that it is time for you to stop working with Trump,” a follower tweeted, prompting Musk to respond, somewhat defensively, that he was not “working for” Trump. A number of customers on a waiting list to buy a Tesla even cancelled their order — a development that must have caught Musk’s attention the way it did Wall Street’s.
Still, Musk has refused to distance himself from Trump. Justifying his decision, he has argued that he is trying to influence Trump for “the greater good.” Is that true, or is it possible that Musk is motivated by self-interest? After all, for years, Tesla and SolarCity, Musk’s solar panel company (now owned by Tesla), have received generous support from the government in the form of grants and tax incentives. Such support, however, pales in comparison to that given to SpaceX, Musk’s privately-held space exploration company, which has received $6.5 billion in contracts from the U.S. military and NASA since 2008 — a staggering sum that has accounted for 80 percent of the company’s revenue.
Simply put, SpaceX would not be in business without government contracts. Because of that, you’d think the government would receive preferential treatment from SpaceX. Just the opposite. As a matter of policy, SpaceX charges the government 20 percent more than it does private clients. But that hasn’t stopped the contracts from flowing in, meaning SpaceX is often flush with government cash.
And SpaceX has not used that cash merely to benefit itself. On three occasions over the past two years, SpaceX has bought a total of $255 million worth of bonds from SolarCity. Though not illegal, it is highly unusual for a company to buy bonds issued by a sister company, since it creates obvious charges of conflict of interest and potential charges of insider trading. At the very least, as one industry observer noted, it makes SolarCity look like SpaceX’s own “private investment platform.”
To be sure, Musk uses SpaceX’s government-supplied money to buy bonds when SolarCity needs capital, and SolarCity always needs capital. Since the company went public in 2012, it has lost money every quarter. In November, SolarCity was in such dire financial shape it avoided bankruptcy only when Musk arranged for Tesla to buy it. SolarCity has continued to lose money, no doubt one reason why it has announced it will issue another round of bonds worth $145 million — bonds that once again could be bought by SpaceX. To date, Musk has failed to answer one obvious question: Is it ethical to take money the American taxpayer believes is paying for U.S. space missions and use it to support a struggling solar panel company?
With this bleak financial picture serving as a backdrop to current events, it is no wonder Musk is doing what he is. He has no choice but to stand by Trump. After all, Musk would be loath to end his connection to the president as long as the government continues to pour money into his historically unprofitable businesses.