WSJ: Musk Called Out for Using SpaceX Resources for Boring Co.

A Wall Street Journal report says SpaceX investors called out Chief Executive Elon Musk about using the space exploration company’s resources for his tunnel digging effort the Boring Company.

Musk has been known to leverage assets across his various technology company’s. Musk personally borrowed $20 million from SpaceX to help fund the electric-car company. He is the chief executive and largest shareholder of both companies. In 2015 and 2016, according to regulatory filings, SpaceX purchased more than $250 million worth of bonds from SolarCity, the solar-panel installation firm where Mr. Musk was chairman and its largest shareholder. Later in 2016, Tesla acquired SolarCity after other bidders passed.

“The arrangement alarmed some longtime investors in SpaceX, including its largest outside backer, Peter Thiel’s Founders Fund, some of the people said,” according to WSJ. “The investors learned in recent months that despite the diversion of SpaceX resources and staffing to the fledgling Boring startup, it was Mr. Musk who was in line to receive almost all of any future profits, these people said.”

The report said Founders Fund partners debated what to do about the diversion of SpaceX resources. Their concerns reached a SpaceX board member and other company officials. The SpaceX board never voted on devoting resources to Mr. Musk’s new venture.

SpaceX received about 6% of Boring stock, “based on the value of land, time and other resources contributed since creation of the company,” a SpaceX spokesman told WSJ. He declined to comment further on the circumstances surrounding the transaction. The report said SpaceX hasn’t formally notified its investors of the exchange.

In a tweet, Musk called the WSJ report “incredibly misleading.”

https://twitter.com/x/status/1074918904852504576

The Boring Company is set to unveil Tuesday its first test tunnel. The entrance to the two-mile-long tunnel is in the SpaceX parking lot at its headquarters in Hawthorne, Calif.

 

[Brando]

Where is the SEC? Aren't they concerned about stock manipulation? Oh, SpaceX not a "public" company. So why is the WSJ even writing about SpaceX ? note: Boring Company a subsidiary of SpaceX. Soon The Brick Store?

I only think I know, what I think I have read:
The Boring Company - Wikipedia

comments from any with direct knowledge is always appreciated - comments from clueless people like me is always frustrating, right?

So why is WSJ publishing this story ? Who benefits?

 

[Eclectic]

Rule 10b-5 (the anti-fraud rule) applies to all securities, not just publicly traded ones. So since SpaceX is selling bonds right now (a security), Musk taking money from Space X to pay for his tunnel hobby (where the Space X bondholders have no claim in the event of a default) is certainly newsworthy. If I were a Space X bond buyer I'd demand that the funds be held in a lockbox with covenants to prevent their use for anything other than Space X business.

 

[Brando]

Rule 10b-5 (the anti-fraud rule) applies to all securities, not just publicly traded ones. So since SpaceX is selling bonds right now (a security), Musk taking money from Space X to pay for his tunnel hobby (where the Space X bondholders have no claim in the event of a default) is certainly newsworthy. If I were a Space X bond buyer I'd demand that the funds be held in a lockbox with covenants to prevent their use for anything other than Space X business.

So you have more trust in WSJ than Elon Musk?

from Elon Musk [find in above article - careful, article from this forum, and you know the bias]
"Totally false. Buried in this incredibly misleading WSJ article is the actual statement from" ...
Thiel’s Founder’s Fund: “we have no concerns whatsoever.”

Luckily we all have seen how through, complete the SEC investigations will be.
Can anyone share with us your share of the last SEC fine collection from Musk/Tesla? Did you get your share of the $40 million? and how the SEC decided to dole out the fine collected to the "investors"?
anyone??

 

[Cosmacelf]

The WSJ article has absolutely no foundation. It insinuates that SpaceX investors are upset, specifically the Founding Fund saying "The arrangement alarmed some longtime investors in SpaceX, including its largest outside backer, Peter Thiel’s Founders Fund, some of the people said."

But then it says "SpaceX received about 6% of Boring stock, “based on the value of land, time and other resources contributed since creation of the company,” said a SpaceX spokesman."

And then this: "Founders Fund in a statement said it has been briefed on the relationship between SpaceX and the Boring Co. “and we have no concerns whatsoever.”"

So, other than juicy gossip amounting to nothing, there's no point to the WSJ article. Cui bono indeed.

 

[Eclectic]

So you have more trust in WSJ than Elon Musk?

That, sir, is a question I will not answer, as the WSJ shows up on time every day while I'm still waiting for the things Musk promised four years ago at the P85D launch event...

 

[Eclectic]

The WSJ article has absolutely no foundation. It insinuates that SpaceX investors are upset, specifically the Founding Fund saying "The arrangement alarmed some longtime investors in SpaceX, including its largest outside backer, Peter Thiel’s Founders Fund, some of the people said."

But then it says "SpaceX received about 6% of Boring stock, “based on the value of land, time and other resources contributed since creation of the company,” said a SpaceX spokesman."

And then this: "Founders Fund in a statement said it has been briefed on the relationship between SpaceX and the Boring Co. “and we have no concerns whatsoever.”"

So, other than juicy gossip amounting to nothing, there's no point to the WSJ article. Cui bono indeed.

That's not quite how I read the story. The story says that Musk first used SpaceX assets/resources for Boring Co. (a classic case of fraud when one person controls two ostensibly separate companies) and didn't get approval for it from either the SpaceX board or SpaceX investors/debtholders.

When the Thiel fund found out and raised questions, then, and only then, did Boring compensate SpaceX. This would explain why Thiel has no concerns NOW, but did at the time that Musk converted SpaceX assets for Boring. In essence, Musk was forced to pay for that which he wrongfully took from SpaceX and I'm sure Thiel is now watching SpaceX quite closely to ensure that it doesn't happen again. This is what usually happens when an investor discovers fraud.

Why did the WSJ run the story now? Because, apparently, Musk has a habit of converting assets and not following corporate formalities and it's a cautionary tale for others who might invest in his ventures. In other words, it sounds like responsible journalism, something that is rare these days,

 

[SION1771]

So you have more trust in WSJ than Elon Musk?

Both have been dishonest in the past (intentionally or not). I don't trust anyone all the time; even when my mom told me I was the handsomest kid in my grade growing up. Best bet is to get information from a variety of sources and weight each one accordingly.

I do trust that the WSJ knows more about finance and regulatory things that Musk.

 

[Cosmacelf]

That's not quite how I read the story. The story says that Musk first used SpaceX assets/resources for Boring Co. (a classic case of fraud when one person controls two ostensibly separate companies) and didn't get approval for it from either the SpaceX board or SpaceX investors/debtholders.

When the Thiel fund found out and raised questions, then, and only then, did Boring compensate SpaceX. This would explain why Thiel has no concerns NOW, but did at the time that Musk converted SpaceX assets for Boring. In essence, Musk was forced to pay for that which he wrongfully took from SpaceX and I'm sure Thiel is now watching SpaceX quite closely to ensure that it doesn't happen again. This is what usually happens when an investor discovers fraud.

Why did the WSJ run the story now? Because, apparently, Musk has a habit of converting assets and not following corporate formalities and it's a cautionary tale for others who might invest in his ventures. In other words, it sounds like responsible journalism, something that is rare these days,

The WSJ insinuates that that’s what the timeline was and that unnamed sources said this was surprising. But the only on the record quote said everything’s OK. I’ll trust named sources, not unnamed secretaries trying to make themselves sound important (since the sources are unnamed, we have no idea who they are).

No doubt some tight panties investors wouldn’t be comfortable with how Elon runs things. On the other hand, there is a line a mile long of investors who would love to invest in any of Elon’s private ventures. At the end of the day, you either trust the CEO, or you don’t.

 

[Electroman]

If I were a Space X bond buyer I'd demand that the funds be held in a lockbox with covenants to prevent their use for anything other than Space X business.

Then you better not invest in SpaceX. This is how Musk operates. He uses intellectual capital from across all his ventures and that has only helped him make better products. When Tesla decided to installing titanium shields under the front bumpers, that was a SpaceX cross pollination of ideas. Did anyone object to that?

Sometimes ideas flows across, and sometimes it will be people with ideas.

 

[Electroman]

That, sir, is a question I will not answer, as the WSJ shows up on time every day while I'm still waiting for the things Musk promised four years ago at the P85D launch event...

Trolling are you? If I were a mod, i would have warned you once and kicked you out for a 2nd such offense.

 

[EinSV]

I love the WSJ's pearl-clutching concern for SpaceX shareholders.

Back here in the real world, SpaceX shares are in extremely high demand on the secondary market.

Not surprising since SpaceX has been one of the best investments on the planet since it was founded in 2002, with a 16,900% return in 16 years and a 4,300% return over the past 10 years, and fantastic prospects for the future. One of the very few companies that rival Tesla's long-term returns. Purely a coincidence, I'm sure. /s

Info below on SpaceX market cap and share price is from Equidate:

FundingAmt MarketCap Shares $PerShare

Series I Apr, 2018
$510M $28B 160M $169.00

Series H (Follow-On) Nov, 2017
$100M $21B 160M $135.00

Series H Jul, 2017
$350M $21B 160M $135.00

Tender offer Mar, 2016 —
$15B 160M $96.42

Series G Jan, 2015
$1.0B $12B 150M $77.46

Tender offer Dec, 2012
— $4.5B 150M $34.68

Series F Oct, 2010
$51M $970M 130M $7.50

Series E Mar, 2009
$47M $550M 120M $4.50

Series D Jul, 2008
$29M $420M 110M $3.88

Series C Feb, 2007
$32M $300M 100M $3.00

Series B Feb, 2005
$11M $160M 80M $2.00

Series A Aug, 2002
$61M $71M 71M $1.00

Equidate

 

[Eclectic]

Trolling are you? If I were a mod, i would have warned you once and kicked you out for a 2nd such offense.

I guess I'm lucky that you're not a mod. Unless you are, and are just being quite benevolent.

 

[Canuck]

So you have more trust in WSJ than Elon Musk?

That, sir, is a question I will not answer, as the WSJ shows up on time every day while I'm still waiting for the things Musk promised four years ago at the P85D launch event...

It seems to me you answered it.

Trolling are you? If I were a mod, i would have warned you once and kicked you out for a 2nd such offense.

I missed the first offence, and the second. I don't agree with his opinion, but I don't see any trolling in him stating it, and a lot of people would agree with him.

But back on topic. How much of Musk's brain belongs to Tesla, Boring, SpaceX, etc. and can we sue him if we hold stock in one and he thinks too long about another? Too much of a stretch? I'd rather they borrow money than his brain.

 

[strangecosmos]

Sincere question: if the Boring Company is a subsidiary of SpaceX, how can it be fraudulent to move money from SpaceX to the Boring Company? Isn’t that just effectively moving money around within SpaceX, since the Boring Company is part of SpaceX?

 

[jbcarioca]

Sincere question: if the Boring Company is a subsidiary of SpaceX, how can it be fraudulent to move money from SpaceX to the Boring Company? Isn’t that just effectively moving money around within SpaceX, since the Boring Company is part of SpaceX?

OMG, using logic to evaluate the choices made; how novel.

OTOH, despite the obvious and inescapable conclusion that there is no 'there, there' it is also true that Mr. Musk and Mr. Theil have had occasional disagreements (reference: PayPal CEO history) so it may be possible that the WSJ article was not entirely incorrect. Still, Mr. Theil could have withdrawn without major difficulty since there appear to be more candidates to buy SpaceX securities than there are SpaceX securities available for sale, hence rising prices.

Under Murdoch the WSJ has lost some journalistic integrity. Once there was a clear delineation between WSJ editorial and WSJ jounalism. That clear distinction kept me a subscriber for decades. Recently I cancelled, as the WSJ increasingly displays overt political views in allegedly journalistic writings. Without much doubt the negative reporting on most environmental issues shows some emerging disdain for scientific endeavors. It seems to me that this specific article might have had some modest basis in historical fact despite distortion of present opinions.

 

[electracity]

Sincere question: if the Boring Company is a subsidiary of SpaceX, how can it be fraudulent to move money from SpaceX to the Boring Company? Isn’t that just effectively moving money around within SpaceX, since the Boring Company is part of SpaceX?

it's not a wholly owned subsidiary

 

[Grendal]

The WSJ has on numerous occasions taken serious shots at Elon's companies with "unnamed sources" and ran articles which were patently false. Saying that the Zuma satellite loss was SpaceX's fault was just one of those.

 

[Rockster]

So, if the "offense" was in the past and there's no concern on the part of SpaceX now, why then is the WSJ running the article now? Could it be that we're nearing the end of a likely positive quarter so it's time for the bears to once again roll out their smear campaig?

 

[Cosmacelf]

So, if the "offense" was in the past and there's no concern on the part of SpaceX now, why then is the WSJ running the article now? Could it be that we're nearing the end of a likely positive quarter so it's time for the bears to once again roll out their smear campaig?

Yes, that's possible. I don't think it is any coincidence of an anti-Tesla bias in their reporting while car companies advertise in the WSJ, yet Tesla does not. If anything, their reporting has been tilting leftward for many years (admittedly starting from a much more business friendly starting point), EXCEPT when it comes to Tesla. Hmmm.

It's also possible that the WSJ has devolved into what the rest of the press has become - a publisher of sensationalized "news" that 90% of the time isn't accurate. If it's juicy gossip, then go with it.

The WSJ isn't useless. Even that article contained solid facts. It's just that it was wrapped in a narrative that likely wasn't supported by those facts.And even if the narrative was correct, it still isn't very newsworthy. But I'm quite sure it generated a lot of eyeballs for them. Heck we're still here talking about it...