TheChek News Flow

Last week, Elon Musk’s X began giving subscribers to its premium, advertising-free version access to a new feature: Grok, a sassy artificial intelligence chatbot created by xAI, a separate AI startup that Musk founded. To some, it wasn’t clear why mashing together the chatbot with the service formerly known as Twitter—or for that matter with Tesla products, as xAI has hinted—made sense.

“I don’t see what Grok is solving,” said Ross Gerber, whose firm, Gerber Kawasaki Wealth and Investment Management, holds stakes in X and Tesla, the electric vehicle maker Musk leads.

At the same time, the arrangement was a classic Musk move: He’s using one of his companies to scratch the back of another of his companies. The integration into X could give the chatbot access to the kind of audience most nine-month-old startups can only dream of. It was another example of the porous boundaries between the many companies Musk leads or controls—a half-dozen by last count. Personnel and board members freely float between them. Musk companies are often customers of other Musk companies.

Such an unconventional approach can raise red flags for shareholders and regulators about self-dealing. For Musk, this hasn’t been a big issue, in large part because most of his companies are private, with passionate investors who seem unperturbed by his idiosyncrasies. But Tesla, the only publicly traded Musk company, landed in a multiyear shareholder lawsuit after it acquired another startup he controlled, SolarCity. Tesla ultimately prevailed in that case. The entanglements in the Musk ecosystem could become a bigger issue as more of the companies go public over time.

“There seems to be this opinion within Elon’s community that essentially all the companies are one,” said Gerber. “But that’s just not how public companies are run.”

Musk didn’t respond to a request for comment for this story.

The quantity and breadth of Musk’s enterprises has few parallels in modern-day business. He is CEO of Tesla and SpaceX, the 21-year-old rocket company he founded. He is the majority owner of X, which he purchased and took private late last year, and he founded xAI, brain implant startup Neuralink and tunneling startup The Boring Company. And the number of Musk companies is likely to continue to multiply—for example, if SpaceX eventually spins off Starlink, its satellite internet provider, through an initial public offering, as is widely expected.

Just as Musk himself hops between his companies depending on the needs of the day, so do his employees. One of the most striking illustrations of that occurred in the weeks after Musk’s Oct. 2022 acquisition of X, when it was still called Twitter. At least two dozen employees from Tesla, SpaceX and other Musk startups moonlighted at X during that period, according to an org chart obtained by The Information at the time.

Among them were Steve Davis, CEO of The Boring Company and a former SpaceX employee, who took charge of cost cutting at X for a few months following the acquisition. Some of those moonlighting employees still list X and another Musk company as their current employers on their LinkedIn profiles.

Omead Afshar, who worked in the office of the CEO at Tesla, has also done stints at SpaceX’s Starbase factory in Texas and at X, The Information previously reported. Afshar moved roles after he became the subject of an investigation at Tesla over the use of company resources to purchase materials for Musk’s personal use, according to Bloomberg. In September, The Wall Street Journal reported that the Department of Justice is investigating the incident, as well as other perks Musk has received while running the company.

Shivon Zilis, who once worked on Autopilot at Tesla, is now a director at Neuralink and until March served on the board of OpenAI, the AI startup Musk helped co-found in 2015 before severing ties with it in 2018. (Zilis is also the mother of two of Musk’s children.)

One Musk executive, Charles Kuehmann, holds the title of vice president of materials engineering at both SpaceX and Tesla. The two teams share employees and collaborate, Kuehmann has said. Tesla even designed its new Cybertruck to use the same custom stainless steel alloy used in SpaceX’s Starship rocket, according to Musk.

While there’s no outright prohibition against the sharing of personnel and resources between companies, corporate governance experts said instances in which current employees of one Musk company moonlight for another can be problematic.

“The main issue is that it could lead to or it almost always implicates a potential conflict of interest between the owners of the two companies,” said Robert Bartlett, co-director of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford Law School. “So in the context of Tesla and Twitter, for instance, it is a concern to Tesla stockholders that they may be inadvertently subsidizing a different company.”

In the case of Tesla, which faces stricter disclosure requirements as it is public, the company seems to reveal in a securities filing that X has reimbursed it for labor costs of Tesla employees. In 2022, X paid $1 million to Tesla for “certain commercial and support agreements,” and in the first two months of 2023, X paid an additional $400,000 for those services, according to a filing

Tesla’s filings also hint at other ways it shares resources with another Musk company. In 2022, the carmaker paid $800,000 to SpaceX for Musk’s use of a private SpaceX plane for Tesla business, according to the filing.

In some cases, Musk’s companies scratch each other’s backs by buying each other’s products. For example, The Boring Company uses Teslas to transport people in its Las Vegas Convention Center Loop. X, which has hemorrhaged revenue as advertisers have fled for less controversial platforms, counts SpaceX’s Starlink internet service among advertisers that have stuck with it.

Musk’s most serious brush with legal disaster from his entanglements was Tesla’s 2016 acquisition of SolarCity for $2.6 billion. At the time, Musk was the biggest shareholder of SolarCity, an installer of rooftop solar panels that his cousins founded. Some Tesla shareholders filed a $13 billion lawsuit against the carmaker over the deal, arguing that it was tantamount to a bailout for the struggling SolarCity. In June, Delaware’s Supreme Court affirmed a lower court’s ruling on the case in favor of Musk and Tesla.

For Gerber, the most frustrating example of resource sharing is Musk himself. If Gerber had his way, Musk would limit his operational responsibilities to his CEO job at Tesla, rather than running six different companies at the same time.

“It’s really hard to be successful, be a good parent, have friends and family and stay healthy and be a CEO in general, or even just be a successful person,” Gerber said. “He’s in way over his head at this point. And he’s using every resource he can to try to keep everything going.”