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Elon Musk's tweets could get Tesla in trouble with the SEC again



Tesla's new and improved board seems to be just as bad in its work as it was before the last acquisition.

The executives of the electric car company must keep an eye on CEO Elon Musk and specifically what he says to the shareholders. But as a couple of tweets from Musk this week, it didn't happen. Musk still seems to be able to say just about anything he wants on Twitter – even though it is deeply misleading or even false – and Tesla's directors don't seem to do anything about it.

It could get them and the company even bigger problems than they have already seen if federal regulators decide to get tough.

Musket's tweets had to do with the number of cars that Tesla expects to produce this year. His first statement seemed unambiguous ̵

1; the company would make about half a million vehicles in 2019.

It would be almost twice as many as Tesla did last year. Given how strong the company was fighting this year to raise production to the same level, 500,000 cars would seem like a steep challenge. That goal was also significantly higher than what the company had previously suggested it would produce, which was somewhere near 350,000 to 400,000 cars.

But it turns out that Musk doesn't really mean it. Some four hours after his tweet about 2019 production numbers, he followed it with another, recognizing that he lost in the previous post. When he mentioned the 500,000 number, he actually had "intended to say [yearly] production rate" would be so much at the end of the year. The company "still estimated" that it would deliver about 400,000 cars this year.

It is unclear how many investors acted on the concept of Musk that was transported in its first tweet that Tesla's production numbers should be better than normal. Both tweets happened after the market closed. But it is possible that some investors bought the stock on the news in subsequent sessions and then took a beating on their investments after the other tweet. Tesla's stocks fell in the next regular session.

It is also possible that some investors bought shares later after seeing the first tweet; Musk has not deleted it.

Tesla should monitor Musk's tweets

Whatever things shouldn't be like this on Tesla. In the fall, the company settled fees filed by the Securities and Exchange Commission over another set of Musk's tweets. These positions were about his proposal to take the business privately and started with his infamous statement that he already had " funding secured " for the effort. The SEC's alleged Musk made the statements aware that Tesla did not actually have the funds available to go private.

As part of the settlement of these tweets, Tesla agreed on a number of initiatives that were to rein in Musk and give its board a greater overview of its activities, in particular his communication with the shareholders.

Justin Sullivan / Getty Images

Larry Ellison, Oracle's chairman and a new board member of Tesla, have shown that he is no corporate governance.

The company decided to name two new independent directors for the board replacing Musk with an independent director as chairman and setting up a board of independent directors who would set the policies that would regulate investor communication. It also decided to pre-authorize any communications made by Musk with investors and to employ a securities lawyer who would review Musk's tweets and other communications.

After the settlement, Tesla went on to make the changes. It was named Robyn Denholm, who was already present in his board as his new chairman. It added Larry Ellison, Oracle's chairman, and Kathleen Wilson-Thompson, human resources manager at Walgreens Boots Alliance to the board as independent directors. And it hired Dane Butswinkas, who had already helped with his SEC dispute, to be his new general advisor.

But as Musk's latest tweets turned out, Tesla's new and newly created board and legal team is no longer in control of its CEO than before any changes.

Tesla's board is much the same as before

This should probably not be a surprise. Apart from the two directors, the board has the same members as before, with the same smell of cronyism; Musk's brother Kimbal still has room. These directors are the same as lavished Musk with ridiculous amounts of stock options, and the same ones who have repeatedly failed to oversee him.

Read this: Tesla's board is terrible in his job – it has been shown that it has no interest in controlling Elon Musk or sticking with investors

No one should be under the illusion that Ellison would especially strengthen the board of Musk. Before joining the board of Ellison, he defended Musk and called him a "very close friend." Ellison was on Apple's table during a backdating scandal of stock options at the company in the 2000s. And Oracle has repeatedly been criticized for its corporate governance practices and excessive executive compensation.

Meanwhile, Butswinkas has already apparently thrown into the towel. He retired from Tesla the day after Musk's tweets about the company's expected production this year after just over two months at work. He is being replaced by Jonathan Chang, a long-standing lawyer at the company, which is another bad sign. With all of the management's revenue at Tesla in recent years, a lawyer who has been there for eight years is unlikely to have made many waves – or will challenge CEO over his Twitter habits.

Butswinkas chose to leave "because of a poor cultural adaptation to Tesla" and because he wanted to return to his family and former law firm in the Washington, D.C. area, a representative said in an email. In a statement, Butswinkas expressed his "tremendous trust" in Chang.

The Tesla representative refused to answer questions about Musk's tweets about Tesla's production forecasts for this year, including whether Tesla pre-approved the original tweet, whether the company believed it was misleading, or whether it did appropriate work to oversee his communications with shareholders.

But the representative said that Butswinkas' departure & # 39; In no way does Tesla's settlement affect the SEC and adds that "Tesla remains fully in line with the settlement."

SEC could knock again

Yet as bad as Tesla's board has been, one would have thought the SEC charges last year would have shaken it out of stupidity. After all, the company had to pay $ 20 million as part of the settlement. It was also agreed that if there was a violation of the settlement, the SEC could try to resume the case in court.

It seems a real possibility. Separately from its study of the "funded secured" statements, the SEC has also looked at the musket's statements about expected and actual production rates of the Tesla Model 3 – even before his latest tweets about them.

In addition, the Agency has an interest in ensuring that companies comply with the terms of the settlements it reaches with them; otherwise why would anyone be alert when it threatened to pay cases against them? And Musk probably didn't make many friends at the SEC when he called it "Shortseller Enrichment Commission" in a tweet shortly after the agency filed charges against him related to "funding secured" posts.

But it won't take another SEC effort against Tesla to make one thing clear: No matter how rebuilt the company's board may be, it's still worthless.


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