The Story of Tesla and Elon Musk’s Behavior
Elon Musk, who joined Tesla’s board of directors as its chairman from February 2004 after leading the Series A round of investment. In the year of 2008, Musk assumed leadership of the company as CEO and product architect, positions he still holds until September 2018. In the past years, Musk was able to bring in both Daimler and Toyota companies as long-term investors in Tesla. In addition, Musk has favored building a value which is less than 30 thousand dollars called compact Tesla model and building and selling electric vehicle powertrain components so that other automakers can produce electric vehicles at affordable prices without having to develop the products in-house. This led to the Model 3 that is planned to have a base price of 35 thousand dollars. And in order to overcome the range limitations of electric cars, Musk made Tesla expand its network of supercharger stations, tripling the number on the East and West coasts of the U.S. in June 2013, with plans for more expansion across North America, including Canada, throughout the year.
In 2014, Musk announced that Tesla would allow its technology patents to be used by anyone in good faith in a bid to entice automobile manufacturers to speed up the development of electric cars. But the unfortunate reality is electric car programs at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales. In February 2016, Musk announced that he had acquired the Tesla.com domain name from Stu Grossman, who had owned it since 1992, and changed Tesla’s homepage to that domain. In January 2018, Musk was granted an option to buy up to 20.3 million shares if Tesla’s market value were to rise to 650 billion dollars. Majority shareholder approval was pending As of 5 March 2018. Elon Musk took an active role within Tesla and was deeply involved in daily business operations and Musk and Tesla cannot be separated with each other.
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In September 2018, Musk was charged by the U.S. Securities and Exchange Commission for a tweet claiming that funding had been secured for taking Tesla private. The lawsuit characterized the tweet as false, misleading, and damaging to investors, and sought to bar Musk from serving as CEO on publicly traded companies. According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share a substantial premium to its trading price at the time that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. In truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners, and his statements about the possible transaction lacked an adequate basis in fact. Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7, and led to significant market disruption.
According to the SEC’s complaint against Tesla, despite notifying the market in 2013 that it intended to use Musk’s Twitter account as a means of announcing material information about Tesla and encouraging investors to review Musk’s tweets, Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained the information required to be disclosed in Tesla’s SEC filings. Nor did it have sufficient processes in place to that Musk’s tweets were accurate or complete. But two days later, Musk reached a settlement with the SEC. As a result, Musk and Tesla were fined 20 million dollars each, and Musk was expected to remain CEO of Tesla, while he was forced to step down as Tesla’s chairman to be replaced by an independent director, and Musk is not eligible to be re-elected in three years. Tesla will establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications. However, as recently as Oct. 4, Musk issued a sarcastic tweet, describing the agency [SEC] as the “Shortseller Enrichment Commission,” despite having agreed to settlement terms a week earlier that his company, Tesla, would monitor his tweets and other communications.
I believe the SEC and musk settlements need to be viewed from two perspectives and Tesla is always musk’s Tesla. First of all, it still has an impact on the fact that Tesla’s privatization did not succeed, because Tesla’s current state is indeed not suitable for being questioned in the public market. This time, no success will have a negative impact on Tesla’s valuation. Secondly, from the point of view of the operation of the Tesla, at present is to focus on the Tesla Model3 that can be in the normal rhythm in bulk delivery. It has become the core issue of Tesla’s development, if the core issue would be able to solve, Tesla still positive on the prospects of the company. The key is if it can last the day that can normal delivery. As for musk himself, He is a super controversial person. Because of this, his resignation has little impact. Followers inspired by Musk will not be affected by his idol resignation. Whatever what position that Musk step down, Tesla still have a hard time erasing Musk’s brand. Musk’s words and actions leading to the SEC investigation and litigation were not smart, but he was smart enough to reach a settlement with the SEC so quickly and effectively. It cannot be denied that Musk is still the most suitable CEO for the moment, and Tesla is faced with many challenges that require him and his team to solve, especially how to improve production efficiency quickly and effectively while ensuring high quality.
Finally, I think the reason why this event is ended in settlements is because the SEC is not really want to punish Musk, but just send a signal that Musk or Tesla need to learn to behave. Tesla is a public company that issues shares on the capital market. Privatization or not is to be reported by the SEC but Musk did not do that, so he is charged by the SEC. This time, the SEC has been unusually “slow” to respond to major events in the financial crisis. Is the SEC really going to kick the pride of American innovation, the leader of companies like Tesla and SpaceX, out of the picture? The answer is no. The Information notes that The SEC’s real goal may be to send a message to Tesla’s board that it should exert better control over musk – or at least impose sophisticated oversight on Tesla’s executive ranks. Although the August 7 news of Tesla’s privatization, according to estimates by the financial-technology and analytics firm S3 Partners, has also left short sellers with paper losses of about 1.3 billion dollars in a single day. But from a stock market manager’s perspective, this haphazardly announced “privatization” without prior communication with the exchange has undermined market stability, with short sellers in addition to a large group of actual stock market participants. According to John Coffee, a professor at Columbia law school in the United States, filing a lawsuit is in fact the SEC’s “high-energy warning” to Musk for a compromise, In theory, the court could permanently ban him from serving in public companies, says Coffee. But in the complaint, the SEC still gave Musk space room– without specifying the timing of the punishment. As is often the case with litigation settlements, the SEC generally only prohibits parties from serving in public companies for several years.
There is also a fact that can make both sides “reconciliation”, the Wall Street journal quoted people familiar with the matter said the SEC with musk drafted a settlement agreement, the agreement has been approved by the SEC commissioner, even though Thursday morning when the SEC ready to submit settlement, Musk lawyers call the SEC lawyers in San Francisco, said they are no longer interested in promoting the agreement. The SEC then rushed to draft and file the complaint. All these pundits point to one point — the SEC doesn’t really want to kill musk. The reason has to be found in the stock market. The heart of the SEC’s settlement is derived from the Musk is the key to the capital to winters’ higher valuations, lose him to the market value of more than 50 billion dollars a carmaker will be a big blow to the securities market will be a mess, the SEC sued Musk news, Tesla after-hours stocks tumbled, fell by more than 10%, fell below 277 dollars, fell to its lowest in more than two weeks. Shares were down about 30 percent from their previous 52-week high of 387.46 dollars in after-hours trading on Thursday. This is undoubtedly “dereliction of duty” for the SEC, which is charged with maintaining the securities market.