Posted by Aishwarya Rai.
Tesla, the Palo Alto-based automative and energy company, has been subject to much staggering lately, due to the conduct of its ex-Chairman and CEO, Elon Musk. Musk and Tesla have been subject to inquiries by the Department of Justice (DOJ) and Securities and Exchange Committee (SEC), as a result of Musk’s conduct; Musk tweeted about taking the company private, stating that funding had already been secured and shares would be priced at $420. Additionally, Musk made reference to those betting on shorting Tesla stocks by mentioning them and the “burn of the century.” Further details showed that Musk had no such funding secured, all whilst Tesla stocks zoomed upwards and short-sellers did in fact face losses.
This led to the DOJ and SEC to inquire into Tesla’s conduct as the tweets seemed to show that Musk misled the market to believe that Tesla would undergo privatization and thus gain some greater market value. When it was revealed that Tesla did not have the required amount of capital to go private, the SEC deemed that Musk’s actions were done to increase stock value and to financially harm short-sellers, making it an act of bad faith.
Furthermore, Musk’s actions showed a lack of ethical consideration as he seemed hostile towards short-sellers. Musk has a responsibility to shareholders as a CEO and the accuracy and truthfulness in the information he disseminates falls under this stipulation. Other acts that put his ethics in question were smoking on a podcast with Joe Rogan, which may go against Tesla’s codes of conduct as it can be said that he was acting as the CEO of the company while on camera.
These incidents put into perspective the need for important business officials to be mindful of the ripple effects of their actions on their fellow employees, clients, and shareholders. The effects of bad conduct, whether intentional or not, can be harmful and put companies at risk of failure. Accurate information is what creates a safe market, legally and financially.
Aishwarya is an economics and finance major at the Stillman School of Business, Seton Hall University,
Class of 2020.
Posted by Kyle Greene.
The SEC recently filed a lawsuit against former Chairman and current CEO of Tesla Elon Musk because of a tweet he sent out earlier this year. The tweet stated that he had plans to take the company private when the stock price reached 420 dollars. He also included that he had funding secured for this, and he may have at the time of the tweet, but obviously was not able to see the deal through. After the tweet, Tesla stock increased quickly by about 9 percent. The SEC claimed that Musk had published “False and Misleading” statements and therefore had violated insider trading and market manipulating laws. Some believe the motive behind the tweet was to punish short sellers of the stock, but Musk has adamantly denied any foul play.
The SEC wasted no time in their attempt to force Musk to settle, threatening him by saying they wanted to have “a judge bar Musk from serving as an officer or director of a public company.” After the SEC took this action, Musk and Tesla ended up settling for an amount of 20 million dollars each in fines. The SEC has forced Musk to step down from his chairman position on the Tesla board of directors; originally they wanted to remove him from CEO as well, but were only able to remove him from the board. I feel as though the SEC used this case as an example to other high level executives of what happens when inaccuracies are so carelessly thrown around. And in an interconnected world, everyone finds out about everything very quickly, so if you decide to publish a statement about the company it better be accurate because you cannot take it back.
This case was never about the wellbeing of Tesla shareholders; the objective was to make headlines and send a message. On the other hand, Musk has not always been a shining example of how to act in the business world, with his recent stunt on the Joe Rogan podcast. The Tesla board of directors has actually set up a committee to monitor Musk’s communications moving forward, which is a smart move by them. Regulators have an eye out for Tesla and Musk especially, being that he is in the public eye so often. Although it is obvious that Musk acted irrationally and illogically, the nature of his work and the innovative mindset behind his companies is one of controversy and pushing the envelope. This careless mistake was just a mishap along the way, and no matter how serious the SEC may want to treat it, “Why would the SEC want to harm the company more than the tweet itself?” Whitehead said. “That would be like throwing the baby out with the bathwater.”
Kyle is a business management major at the Stillman School of Business, Seton Hall University, Class of 2020.