Is Elon Musk a genius who wants to make money for everyone who has invested in his company or is he an unfeeling, uncaring individual who doesn’t care one bit for his shareholders? Elon Musk: The Unethical Behavior of a Billionaire
What we do know is the Elon Musk has just been served with a subpoena by the SEC and that he doesn’t know much about using social media – or, is he so arrogant he doesn’t care?
One Tweet is all it Takes
The SEC has very rigid laws in regard to what the chief executive (actually, any employee) of a publicly traded company can and cannot say to the media. This includes social media as well as print or electronic media.
On August 8, 2018, Elon Musk took to Twitter to muse that he was considering taking the company private and that he had the funding to do so. This immediately plunged shares of the stock by about 3 percent and sent the company’s executives and their investor relations people scratching around for answers. There is an SEC requirement that states that if the executive of a publicly traded company makes a statement about the company, the statement must be served up as a fact.
Obviously, not everyone uses Twitter. It means, for example, that an investor using Twitter, someone who follows Elon Musk’s Twitter account, could potentially trade on information virtually in real time. If another investor is away on vacation or does not have internet access, an off-handed negative comment could wind up costing thousands, tens of thousands.
Going Private
Any company, no matter how large, can buy back its stock. It can be a good thing for an investor, or a bad thing. The problem is that investors have been confused by Tesla’s intentions. Not long ago, Elon Musk wrote a blog about the involvement of a major investor:
“Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private… after the Saudi fund bought almost 5 percent of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. … I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed.”
However, there is a huge difference between taking a company private and actually doing so. As a result, Tesla’s stock chart has resembled a see-saw rather than a trend. It should come as no surprise that if a publicly traded company talks about doing something, but lacks the funds to buy or sell, it could be construed as simply trying to make money by manipulating the price.
On August 13, 2018, Musk tried to clarify his statement:
“Before anyone is asked to decide on going private, full details of the plan will be provided, including the proposed nature and source of the funding to be used. However, it would be premature to do so now. I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors…”
As far back as August 2, 2018, Elon Musk stated:
“I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share. This was a 20% premium over the ~$350 then current share price (which already reflected a ~16% increase in the price since just prior to announcing Q2 earnings on August 1st).”
In clarification to his earlier remarks, Musk stated the following:
“The only way I could have meaningful discussions with our largest shareholders was to be completely forthcoming with them about my desire to take the company private. However, it wouldn’t be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time.”
Carefully Crafted
It is difficult to not feel that after Musk’s Twitter episode that corporate spin doctors rushed in to soften his ponderings. It is a criticism of Musk. Type his name into most any search engine, and the word “egotistical” appears again and again, not to mention Tweet after outrageous Tweet.
That he is a genius is not in question, Elon Musk: The Unethical Behavior of a Billionaire. That he insults and demeans his critics and seems oblivious to his choices is not in question either. This is a scandal in the making. He would be most wise to learn that there are consequences for playing with the investment community.
