It’s somewhat a strange incidence and news to heard that Tesla chairman Elon Musk is set to resign due to controversial happenings that led him to left his chairman post.
Tesla Inc and Elon Musk have agreed to pay $20 million each to financial regulators and the billionaire will step down as the company’s chairman but remain as chief executive, under a settlement that caps a tumultuous two months for the carmaker.
The agreements related to securities fraud , disclosed by the US Securities and Exchange Commission on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the loss-making electric car company.
The SEC on Thursday charged Musk, 47, with misleading investors with tweets on 7 August that said he was considering taking Tesla private at $420 a share and had secured funding. The tweets had no basis in fact, and the ensuring market chaos hurt investors, it claimed.
Investors and corporate governance experts said the agreement could strengthen Tesla, which has been bruised by Musk’s recent behaviour, which included smoking marijuana and wielding a sword on a webcast, and attacking a British rescue diver via Twitter.
The settlement should place more oversight on Musk while not taking the “devastating” measure of forcing him out, said Steven Heim, a director at Boston Common Asset Management, which owns shares in Tesla battery maker Panasonic Corp.
Now Tesla must appoint someone as it’s chairman, two independent directors, and a board committee to set controls over Musk’s communications under the proposed agreement.
“The prompt resolution of this matter on the agreed terms is in the best interests of our markets and our investors, including the shareholders of Tesla,” SEC Chairman Jay Clayton said in a statement.
Thursday’s charges shaved about $7 billion off high-flying Tesla, knocking its market value to $45.2 billion on Friday, below General Motors Co’s $47.5 billion.
Considering the settlement, the agency pulled back from its demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction that many investors said would be disastrous.
“I think this is the best possible outcome for everyone involved” said Ivan Feinseth of Tigress Financial Partners, who rates Tesla “neutral” and who called the SEC’s penalty “a slap on the wrist” for Musk. “The fact that he can remain CEO is very important for the company.”
Neither Musk nor Tesla admitted or denied the SEC’s findings as part of the settlement, which still must be approved by a court. Tesla and Musk did not immediately respond to requests for comment.
Musk had been directly involved in almost every detail of Tesla’s product design and technology strategy, and drove the company’s employees to extraordinary achievements — much as another Silicon Valley chief executive, Steve Jobs, did at Apple Inc.
Musk To His Employees
Elon Musk cheered on progress making a key component of the Model 3 sedan and urged Tesla Inc. employees to pay no attention to distractions in a series of emails sent in the wake of the US suing him for securities fraud.
Musk, Tesla’s chairman and chief executive officer earlier wrote in one of the emails that the company’s Model 3 drive unit team had built more than 10,000 units in a week. That’s potentially crucial progress for a company that has been vague about when it’ll be capable of building that many complete Model 3s, the first electric vehicle it’s tried to mass-manufacture.
“You’re doing an incredible job,” Musk, 47, wrote in the subject line of a separate email sent to employees Friday. “Ignore all distractions. One more hardcore weekend and we will be victorious.”
Tesla representatives didn’t immediately comment on the emails, copies of which were obtained by Bloomberg News. Musk has called the Securities and Exchange Commission’s lawsuit unjustified, and the company’s board released a statement saying it was “fully confident” in his integrity and leadership.
Musk’s Earlier Tweets
Elon Musk has a history of getting into trouble with his tweets. His recent one on taking Tesla private, which sent the company’s share price soaring 11%, has not gone down well with regulators. By not disclosing this important strategic line of thinking on the usual channels, giving advantage to a smaller set of investors, he might have flouted norms set by the US capital market regulator.
Besides, there were concerns it might not be true: the number 420, which has a different connotation in India, is used to refer to cannabis in the US. The Tesla board released a statement saying it had met several times to discuss the issue, but that hasn’t stopped the Securities and Exchange Commission (SEC) from probing his tweets, and their ramifications beyond.
Musk has stated his reasons why he wants to take Tesla private. The volatility in share price distracts employees, many of whom are shareholders too; the quarterly reporting cycle might put pressure on managers to ignore long-term interests; and most importantly, it would save Tesla from being attacked by short-sellers, who have incentive to beat down the company. Musk might have already extracted some revenge. Short sellers lost $1.3 billion on paper after Musk posted his tweet.
HOW MUSK JOINED TESLA ?
Tesla, Inc. (originally Tesla Motors) was incorporated in July 2003 by Martin Eberhard and Marc Tarpenning, who financed the company until the Series A round of funding. Both men played active roles in the company’s early development prior to Elon Musk’s involvement. Musk led the Series A round of investment in February 2004, joining Tesla’s board of directors as its chairman. Musk took an active role within the company and oversaw Roadster product design at a detailed level, but was not deeply involved in day-to-day business operations.
Following the financial crisis in 2008 and after a series of escalating conflicts in 2007, Eberhard was ousted from the firm. Musk assumed leadership of the company as CEO and product architect, positions he still holds today. Tesla Motors first built an electric sports car, the Tesla Roadster in 2008, with sales of about 2,500 vehicles to 31 countries. Tesla began delivery of its four-door Model S sedan on June 22, 2012. It unveiled its third product, the Model X, aimed at the SUV/minivan market, on February 9, 2012; however, the Model X launch was delayed until September 2015. In addition to its own cars, Tesla sells electric powertrain systems to Daimler for the Smart EV, Mercedes B-Class Electric Drive and Mercedes A Class, and to Toyotafor the RAV4 EV. Musk was able to bring in both companies as long-term investors in Tesla.
SOURCE – livemint