It was one heck of an expensive tweet, but in the end Tesla founder Elon Musk lives on to fight another day.
The innovative and controversial CEO of the electric car corporation was facing a potential ousting due to a Securities and Exchange Commission lawsuit charging him with misleading investors with a tweet about taking his company private.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Musk quickly settled with the SEC, despite initially vowing that he would not do so, and agreed to pay a $20 million fine, with Tesla also paying $20 million. As part of the agreement, Musk must step down as chairman of the company for at least three years but can remain as CEO.
Good Deal?
Appraisals of the settlement by financial analysts vary, with personal opinion about the polarizing business magnate who has a cult-like following among supporters no doubt weighing in as a factor.
“In three words, the SEC blinked,” Lloyd Greif, CEO at Los Angeles investment banking firm Greif & Co., told the Los Angeles Times. “This is clearly a back-off; it’s a victory for Tesla. The SEC had him with an open-and-shut case. But maybe they went too far with the original complaint.”
Elon Musk
“I think this is the first hairline crack in the Elon Musk personal image,” branding expert Rob Frankel told USA Today. “Musk by now is known as much for his erratic behavior in both his personal life and his business life as he is for his creative and innovative genius. This is the first formal rebuke that has resulted from that behavior, and that could be a problem.”
It’s hard to see how a $20 million personal fine can dent Musk, who has a net worth of $19.7 billion. The key for Musk was maintaining a top role at Tesla, which the settlement allows him to do. The disastrous tweet highlights Musk’s volatile and mercurial personality, which has served as an integral part of his enormous success over the years.
In an editorial published before the settlement was announced, The Wall Street Journal chided the SEC for seeking to punish the entrepreneur for displaying the spark that has served him so well:
Tesla’s lofty stock valuation exceeding that of much larger automakers owes to investor faith in Mr. Musk’s supposed magic. Investors seem to view his penchant for puffery as a feature rather than a bug. And while Mr. Musk deserves some SEC sanction, barring him from serving as a director or officer of a public company is excessive.
Blazing a Trail
Liberty Nation’s Andrew Moran in August wrote a thorough analysis of Tesla’s 2018 outlook, focusing on the good and the bad in summarizing just how wild a ride a Musk company can be. Will the SEC settlement, which requires the hiring of an independent chairman with the idea that he or she might be able to rein in Musk, positively or negatively affect the culture of Tesla?
Tesla Model 3
The company has several problems on the horizon. Top executives have departed, it is not reaching its production goals for the Model 3 sedan, and there is a cash shortage that needs to be dealt with.
Bob Lutz, former vice chairman of General Motors, told the Los Angeles Times that the cash issue was crucial to Musk’s decision to reach a quick settlement. “The only reason he was forced to settle is that he needs to raise cash and can’t do it while under SEC investigation.”
Despite the problems, most analysts agree that if Tesla is to break through as a real difference-maker in the automotive industry, then Musk must remain as the power source that makes the company go.
“People can replace him as chairman, but nobody can replace his visionary point of view,” Kelley Blue Book analyst Rebecca Lindland told USA Today. “We need people like him in the world to push us forward, to challenge boundaries, to challenge ideas. We don’t need to have him run the day-to-day operations.”
