Tesla's Inconsequential Robotaxi 'Reveal'

Several hugely important things are happening for Musk & Tesla this fall, but the "Cybercab" event is not one of them.

While many Tesla fans and Tesla skeptics will tune into Thursday’s “robotaxi” (excuse me, “Cybercab”) reveal, it will amount to a big nothingburger. Elon Musk will reprise the lies he has told for years, most memorably in April of 2019 when he promised one million robotaxis on the road before 2020 ended.

There will, of course, be lots of glam and glitz on the Warner Brothers movie set. Musk will make great and grand promises (all of which will amount to non-actionable “puffery”). The Cybercab mock-up will draw oohs and aahs from the faithful. Some Optimus robots may traverse the stage, amazing all with their ability to fold clothes and perform other wonders.

(Cybercab rendering from torquenews.com)

But beneath it all will be the inescapable reality that Tesla is far, far behind in the autonomous driving race. And the further reality that, having eschewed radar and LiDAR, Tesla will forever remain far behind. Hence, the highly questionable business model for the Tesla robotaxi venture will remain a theoretical problem.

At best, the Cybercab party will merely distract from three far more significant events about to unfold.

A. The Tornetta Bomb Will Soon Drop

Any week now, perhaps any day now, Kathaleen St. Jude McCormick, Chancellor of the Delaware Court of Chancery, will hand down a detailed opinion and final order in Tornetta v. Musk. Having reviewed with care the transcript from the August 2 oral argument, I believe the Chancellor will explain in clear and logical terms why Tesla’s “ratification” gambit was ineffective to overrule her 200-page ruling last January that voided Tesla’s 2018 stock options grant to Musk. (I wrote about that hearing here.)

The Chancellor, in the same opinion, will review with care the recent teachings of the Delaware Supreme Court in the Dell Technologies case, and award the plaintiff’s attorneys either cash or stock for their efforts. How big will the award be? One can make a persuasive case for a low end of $500 million, a high end of $3 billion plus, or anything in between. The Delaware Supreme Court has, to say the least, left the Chancellor with ample discretion. It is all but certain to be the largest legal fees award in history.

These rulings will trigger more vituperative attacks on the Court of Chancery from Musk and his flying monkeys. These days, the flying monkeys include prominent members of the alt-right, so we can expect Donald Trump or his surrogates to get in on the action.

The Chancellor’s ruling will also force the Tesla board to consider devising a new grant of stock or options to give Musk the 25% ownership percentage he has demanded (and that he had almost achieved before he sold much of his Tesla stock to buy Twitter). Any such grant will result in a massive earnings hit to Tesla. And, although the lawsuits will be filed in Texas rather than Delaware, with untested law in an untested court, any such grant will likely result in breach of fiduciary duty claims against Musk and his fellow directors.

It will all be quite interesting, especially as all this will play out while Tesla continues to report declining margins, shrinking earnings, and further price cuts and incentives.

B. The Twitter Acquisition Chickens Will Come Home to Roost

There is powerful evidence that Musk violated Section 13(d) or Section 13(g) (or both) of the Securities Exchange Act of 1934 in connection with his 2022 acquisition of Twitter. Those apparent violations have already resulted in several civil suits (including this quite serious one) seeking hundreds of millions of dollars in disgorgement and damages, and also have triggered an SEC investigation.

After ducking and dodging for almost a year, Musk finally submitted to an SEC interview earlier this month.

It seems highly likely that the SEC will soon take action against Musk. This will not only bolster the civil cases, but could as well result in significant fines and sanctions against Musk.¹

C. Trump & Musk: Either Immunity or Imprisonment

As is well known, Musk has now gone all in for Donald Trump. Musk’s social media site has become hotbed of alt-right misinformation. His political action committee has reportedly offered a $47 referral bonus for each registered swing-state voter who signs an online petition (which requires furnishing personal contact information) “in favor of free speech and the right to bear arms.”

If Trump wins in November, not only will Trump unshackle himself from all federal prosecutions, but he will bestow upon Musk virtually complete immunity from all federal laws and regulations.

If Trump wins, then the hyperventilation from the far left, accusing Trump of being a fascist, would finally have some real purchase. The marriage of Trump and Musk would be familiar to a Mussolini or a Hitler. It would be an ugly moment in United States history.

If, on the other hand, Trump loses (and if his attempts to steal another election ultimately fail), then we can expect a Harris Administration to make a determined effort to require Elon Musk, at last, to obey the law, much as the rest of us must. And that, I believe, will put a big crimp both in Tesla’s absurd market capitalization and in Musk’s proclivity for lying endlessly about everything.

[Post-publication note: the original version of this article stated that in October of 2019, Musk promised one million robotaxis on the road before the end of 2020. Actually, that promise was made in April of 2019. Thank you, Anton Wahlman, for the correction.]

1. Unless, of course, Trump wins in November.