Tag Archives: Elon Musk

SEC vs Elon Musk

Posted by Dan Mikrut.

Who knew that typing 280 characters could turn into a $40 Million dollar law suit. This is the cold reality in the case of the SEC vs. Elon Musk. On September 27, 2018 the SEC filed securities fraud charges against Elon Musk, the chairman and CEO of Tesla Motors. On August 7, 2018 Mr. Musk stated in a Twitter post “Am considering taking Tesla private at $420. Funding secured.” According to the SEC, his statement mislead the investing public that he could take the company back at a substantial premium during the current price of the company stock. The information was noted as misleading and false because they lacked any basis in fact. During the time of the tweet Musk had not received or secured funding for the proposed transaction. The stock price of Tesla ended up sky rocketing to $379.57 an increase in $37.58 a share within 24 hours of the tweet going public to Musk’s 22 million twitter followers.

Musk’s questionable actions lead to some serious consequences. The SEC and Musk had settled the case on September 29, 2018. Musk had to abide by 4 main points.

1. Musk must give up being Chairman for 3 years, but will retain a seat on Tesla’s board
2. Two new independent directors must be put on the Tesla Board
3. Musk & Tesla must pay $20 million each in fines
4. Musk must have a an oversight personnel on all his communications and social media accounts

On the personal note, I believe that the SEC went harsh on Musk and the whole ordeal is little obscured. While yes, I do believe Musk made a mistake and posted false information; he was quick to make sure it was known that his tweet was a joke for his wife referencing a 420 joke. This case is another perfect example of the American legal system taking advantage of American businesses and their profits over small legal incidents. I believe that the overpriced fine should’ve only been given to Musk and not the company, because Musk was the only person responsible for the tweet and not the company. As if the fine wasn’t bad enough, the SEC striped Musk of his position and responsibility in his own company that he helped cofound. While the oversight personnel on Musk’s accounts sounds like a good idea, it does also sound a little invasive and going against Musk’s freedom of speech. All in all, I don’t agree with the final verdict in this case because it was too aggressive over a small mistake that Elon Musk made, and shows how the justice system is a costly system that is failing America.

Dan is an IT management major in the Stillman School of Business, Seton Hall University, Class of 2021.

Works Cited:

CBS/AP. “5 Things to Know about the SEC’s Complaint against Elon Musk.” CBS News, CBS Interactive, 28 Sept. 2018, www.cbsnews.com/news/5-things-to-know-about-the-secs-complaint-against-elon-musk/.

Henning, Peter J. “What Are the Consequences of Elon Musk’s S.E.C. Criticism?” The New York Times, The New York Times, 12 Oct. 2018, www.nytimes.com/2018/10/12/business/dealbook/musk-tesla-twitter.html

Elon Musk and His Public Statements

Posted by Surya Makkar.

Over the past few years, Tesla has emerged as a frontrunner when it comes to electric vehicle technology. Their technology packed, self-driving, vehicles have come with their fair share of problems however. Not only has Tesla faced legal obstacles when it comes to their various technologies they use in their products, but more recently, Tesla CEO Elon Musk was sued by the Securities and Exchange Commission (SEC). Elon Musk was accused of committing fraud by publically making false statements, which could have impacted investors. To give some background, around a month ago, Elon Musk tweeted saying that he had “funding secured” to take Tesla private at $420. Something interesting to note is that the SEC did not sue Tesla as a whole, but rather only filed a suit against Elon Musk.

Elon Musk had never said anything before this to investors or shareholders about taking the company private, which is why everyone was caught off guard and was extremely shocked. After the suit was filed, Tesla shares fell more than 12 percent in after-hours trading. The SEC subpoenaed Tesla, financial institutions, and Tesla board members, to interview them and gather more information. The SEC found that Musk had been in a feud with investors who continued to say Tesla shares would fall.
A few days later, Musk and the SEC reached an agreement that required Elon to step down as Chairman of the board of Tesla and required him to pay a $20 million fine. According to the agreement, Musk does not have to admit any guilt and has 45 days to step down from the role of chairman. He will continue to serve as the CEO of Tesla however. This case goes to show how business professionals are being watched at every moment. One wrong move in the business world can lead to millions of dollars of legal action being taken against you, which is why it is imperative that people in the business world act as if they are being watched at all times.

Surya is a business law student at the Stillman School of Business, Seton Hall University, Class of 2021.

Sources:
https://www.nytimes.com/2018/09/27/business/elon-musk-sec-lawsuit-tesla.html

https://electrek.co/2018/09/29/elon-musk-settles-sec-lawsuit-resign-tesla-board-million-fine/

Elon Musk in Deeper Trouble

Posted by Paul H. Duffy.

Ever since Elon Musk tweeted on August 7th about the possibility of taking his company private he has been in deep trouble with the SEC. He made a series of tweets about the potential move saying funding was secured for $420 a share. After a few weeks, the SEC began to file a lawsuit against Musk after he backed out of the decision. The SEC claimed he misled investors and manipulated stocks. Initially Tesla and Musk were ready to fight the suit but a few days later things changed. “Elon Musk reached a settlement with the Securities and Exchange Commission that allows him to remain chief executive of Tesla Inc. but requires that he step aside from the chairman role for three years,” (Higgins and Michaels). The agreement also included a $20 million fine. Tesla also decided to make changes, “Tesla has agreed to appoint two new independent board members, establish a new committee of directors and create controls to oversee Mr. Musk’s communications, according to the SEC,” (Higgins and Michaels).

This isn’t the first time Tesla and Musk are in trouble with the SEC. Last year, the SEC began probing Tesla about misleading investors over the production of their newest model the Model 3. “As production started, he claimed about 1,600 cars would be made in the third quarter of 2017 before reaching 20,000 in December. Those forecasts were far below what he predicted roughly a year earlier, when he said as many 200,000 Model 3s would be made in the second half of 2017,” (Michaels, Glazer, and Higgins). While no official charges have been filed, the SEC has probed into Tesla’s manufacturing data. However, it will be difficult to prove Musk and Tesla intentionally tried to mislead investors. “Tesla already faces private litigation in a San Francisco federal court, where a group of investors alleged the company misled investors about how quickly it could ramp up Model 3 production,” (Michaels, Glazer, and Higgins). Tesla is fighting this saying they disclosed problems in a timely manner.

While Musk is a very famous and popular business owner, these problems seem to start adding up. Musk shows that tweeting business announcements on a personal account can create a grey area. Was his tweet an official business announcement or just a personal idea? Tesla is known as the company of the future and in the long run they will be stable and making profit. But with this increased production problems, Tesla could see their business really start going backwards. Time is of the essence especially as other established companies are moving into the electric car market. Time will tell if Tesla can right the ship.

Paul is business management major at the Stillman School of Business, Seton Hall University, Class of 2021. 

Sources:

https://www.wsj.com/articles/sec-pressing-tesla-directors-for-details-on-communications-with-elon-musk-1534450010

https://www.wsj.com/articles/elon-musk-can-remain-tesla-ceo-but-must-step-down-as-chairman-in-sec-settlement-1538257394

Artificial Intelligence: A Legal Nightmare

Posted by Nicholas Cizin.

Artificial intelligence has the power to transform the business world like no other invention. It is the ability for computers to think and learn for themselves, quite often better than humans. A great example of this is IBM’s Watson. Watson is famous for its time on Jeopardy, thinking, generating, and then speaking answers quicker and more accurately than a human contestant. Recently, Watson has been revolutionizing healthcare, helping to diagnose cancer and develop new treatments (1). The positive potential of artificial intelligence on business is limitless. In the future, businesses will likely be able to use artificial intelligence to increase production efficiency, reduce expenses, and develop new products.

Despite such amazing business potential, AI also poses an extreme threat. Companies could easily use AI to exploit customers, hack other companies, and steal from competitors. Recognizing both the positives and negatives of artificial intelligence development, lawmakers have the responsibility to pass laws that regulate AI’s destructive power. As it is said, with great power comes great responsibility. There are laws to regulate technology, but currently none specifically for AI. Courts deem developers liable for harm caused by software like robotics when the developer is negligent or could foresee harm. But with AI’s ability to think for itself, there is potentially no fault by humans or foreseeable injury. Traditional tort law would therefore most likely find developers not liable (2). Companies and lawmakers alike agree new laws must regulate AI, unfortunately, the timing of this regulation is still under debate.

Some believe laws should be implemented only after artificial intelligence affects the business world. Thus, laws would be created on a case-by-case basis. For example, Thomas C. Henderson, a professor at the University of Utah’s school of computing, uses a speed limit analogy to represent his view on AI regulation. He says, “you only impose speed limits once you build cars that can go faster than is safe” (3). Although, Mr. Henderson’s opinion is quite logical, others believe AI has too much potential for harm to regulate only after a negative result has occurred. This is the opinion taken by the business-world famous, Elon Musk. Musk firmly believes, “we need to be proactive in regulation than reactive. By the time we’re reactive in AI regulation, it’s too late” (4). Elon Musk sees the potential harm AI can cause if not regulated from the start. The only issue is that it is quite difficult to regulate something that has not been created. For example, the British Parliament’s House of Commons Science and Technology Committee stated, “while it is too soon to set down sector-wide regulations for this nascent field, it is vital that careful scrutiny of the ethical, legal and societal dimensions of artificially intelligent systems begins now” (3). Governments around the globe fully recognize the challenge of regulating AI in its early stages of development.

In my opinion, AI regulation should be a combination of the two theories. If dangers of AI can be logically seen, laws should be put into place before the development of such activity ever occurs. This may inhibit AI’s potential, but is worth preventing foreseen harm. Not all harmful uses of AI can obviously been seen as it is in such infantile stages of development. This is why constant evaluation and laws on case-by-case basis must actively regulate AI. If a harm cannot foreseen, as most is not with developing technology, then the law must be able to expand and adapt quickly to prevent harms from being repeated. In the coming years, it will be interesting to see how laws regulate AI. One can only hope regulation is done so successfully.

Nicholas is an accounting major at the Stillman School of Business, Seton Hall University Class of 2020.

Sources: