
Elon Musk’s Ultimatum to Tesla: Fight the S.E.C., or I Quit - prawn
https://www.nytimes.com/2018/10/02/business/tesla-elon-musk-sec.html
======
kirillzubovsky
These articles about Elon are interesting to me because Tesla could not have
become such a valuable car company in such a short time if it wasn't for Elon,
and that includes his personality.

Yet, many couch investors would prefer to have a CEO who is stable, boring and
predictable. People want to put their money in for steady long-term returns,
and not worry. Tesla is doing wild things which are causing crazy growth, but
also crazy panic.

It seems the market really wants Tesla to slow down so they can sell more
stock to an average risk-averse consumer, but Elon wants to keep running
light-speed, regardless of the short-term worry that it might create. Neither
is wrong, they just have different priorities.

~~~
chipotle_coyote
I'm going to push back against this narrative, because it seems a lot of the
"let Elon be Elon" arguments are neatly encapsulated in this line:

 _Tesla is doing wild things which are causing crazy growth, but also crazy
panic._

But the critics of Musk's behavior would respond, I think correctly, that
there is a categorical difference between "wild things which cause crazy panic
because they are high risk with high upside potential ('crazy growth')" and
"wild things which cause crazy panic because they are high risk with little to
no upside potential." And while perhaps sometimes it's difficult to tell
whether a certain Crazy Elon Thing falls into Category A or Category B, things
like "let's accuse someone who criticized me of being a pedophile, that'll
teach him" or "hey, we have nothing signed and this blatantly violates SEC
rules, but screw it, it'd be funny if I said we were going private at $420 a
share, because 420"? Those are very clearly things that are in the "little to
no upside potential" category.

~~~
tbabb
I have a hard time seeing arguments against the SEC taking action-- especially
here-- as anything but overcomplicated rationalizations rooted in a personal
adoration of Elon Musk. Basically, "I like Elon Musk and so I don't want
anything bad to happen to him."

But (a) laws don't work like that (b) selectively enforcing rules (especially
those designed to prevent fraud and deception) isn't justice or ethics, and
(c) he genuinely did something wrong-- _multiple_ things wrong. He _deserves_
to face adverse consequences for those choices.

~~~
miemo
This reminds me of the heart surgeon student who avoided jail time for
attacking her partner with a knife because she 'showed potential'.

People are perhaps sympathetic to Elon because he shows more potential than
other CEOs, no? Did the judge in the case above show leniency because 'he
liked her'?

For b) rather than selectively enforcing rules, this would be an example of
discretionary punishment, which is absolutely a part of justice and ethics, as
in the case above. Some could interpret your argument to support mandatory
minimum sentencing, which many don't believe works.

~~~
justtopost
Disgressionary punishment is based on the severity of the crime, not the
'potential' of the person. You just described bias.

~~~
ricardobeat
_should be_. In reality it is at the discretion of the judge.

------
dragosmocrii
Personally, I think Elon Musk wants out of Tesla. The things he did lately,
all point to this conclusion. Maybe he lost vision or interest in the company,
but leaving from his own will would jeopardize the future of the company,
since most of Tesla's backers are fans of him. Arranging himself an exit in
this way, would make it look as he's the victim left with no choice but leave.

~~~
imhoguy
He is going to leave and do the promised buyout. The stock price is bargain.
Tesla will be privately held company soon. My $0.02.

~~~
dragosmocrii
Curious note I found while trying to validate your claim that current stock
price is bargain: if you look at the stock price on Google for the past 5
days, the graph looks like a neural network tried to reproduce Tesla's logo.

Going back to your claim, I dont think a current price of $300 per share is
bargain. But with his current behaviour, I can see that happening in the near
future.

~~~
geezerjay
> Going back to your claim, I dont think a current price of $300 per share is
> bargain.

Just to drive the point home: what's Tesla's dividend per share?

~~~
dnadler
Obviously, that's a disengenuous argument. Many companies that don't pay
dividends are (rightly) valued based on future growth and warnings estimates.

------
cperciva
Is Elon Musk really an asset that Tesla needs to hold onto? I'll admit that
he's a great salesman; but he's also a spoiled child who throws tantrums when
he doesn't get his way. If Tesla wants to be taken seriously as a car company
-- rather than as a maker of toys for people who have too much money on their
hands -- they might well be better off calling his bluff.

~~~
r00fus
Musk sure sounds a lot like a younger Steve Jobs.

Maybe he needs to leave then come back?

~~~
Someone
When Jobs left Apple, he was 30; when he returned, he was 42. Musk is 47. If
he needs time away from Tesla to ’grow up’, he better do it fast.

~~~
DeonPenny
Your acting as if job change and apple accepted him back. No apple crashed and
burn without him as his became more of what he was. He never "grew up" he just
proved that his current attitude was correct and the people saying he need to
"grow up" were wrong.

------
askaboutit
As someone who doesn’t own a Tesla, but did purchase a very crappy jacket they
sold in 2012. I can say without Elon I put the whole company in “meh” mode.
The truck, the roadster, the 3. All great products. The sense of its
technology advancements. These stem from what Elon and the chief designer
want. You can sense it. It’s like a heartbeat on the design.

Take Elon away. I’ll buy whatever dumb electric rolls off the lot. I’d only
buy a Tesla car because I know that insanely dedicated, incredibly driven,
“nutter” is still in charge of what happens. And the Easter eggs make the
whole thing interesting. A normal CEO will never ok the things Elon does.

~~~
oarfish
Where does you intimate knowledge about Musk's psyche stem from? Purely
inferred form his public persona or do you have first-hand information?

I ask because this sounds a bit like a cultist describing the cult leader.

~~~
DeonPenny
It sounds like a fan describing a celeb. Saying this isn't musk pscyche
ignores the clear and consistent pattern his business and his business
decision have.

------
Animats
There used to be a sort of tradition that you started with the inexperienced
startup CEO. Then, when the business became large, the board got someone with
experience running a big company. That's changed in recent years. Page and
Brin are back running Google, Jobs came back to Apple, and Zuckerberg is still
in charge at Facebook.

On the other hand, Uber got rid of their startup guy and got a manager type,
who has been getting their losses under control, and something similar
happened at Twitter. In both cases, the company had operational problems and
cost problems, but plenty of users/customers.

That's the Tesla situation. Product is OK. Customers are enthusiastic.
Production is in trouble. Cost and labor hours per car are way too high. The
financial situation isn't good. That's usually when the board and stockholders
put in an operations-oriented CEO.

~~~
starbugs
> That's the Tesla situation. Product is OK. Customers are enthusiastic.
> Production is in trouble. Cost and labor hours per car are way too high. The
> financial situation isn't good. That's usually when the board and
> stockholders put in an operations-oriented CEO.

And in doing so risk that the company becomes another GE-like corporate which
is no longer able to innovate and inspire people.

Things have changed. Markets have changed. Innovation cycles have become much
shorter.

~~~
aries1980
> Innovation cycles have become much shorter.

Yes, but you need to build up a world-wide customer support network that is
willing to learn these new innovations that fast at a modest rate.

If Tesla would stay in the performance car segment, then the company doesn't
need to scale the customer service that much. If you smash a bit your McLaren,
you accept that only a handful of companies can fix it. But when you want to
roll out and dominate the average joe market with the Model 3, you need to be
able to sell it with a moderate maintenance cost. That can only happen if the
local car mechanics are able to fix it, but this unlikely happen if every new
model comes with radical changes.

~~~
justtopost
You, nor your local mechanic, can work on teslas. While your mclaren dealer
would freakout, and your value perhaps drop, you can poke into whatever guts
you want. Until you can OWN a tesla, I think they will stay a cult minority.

------
gok
> They had passed on Thursday’s generous offer, and the S.E.C. felt compelled
> to extract greater concessions. The ban on Mr. Musk’s serving as chairman
> went from two years to three, and his fine doubled to $20 million. Tesla
> will also pay a $20 million fine, and Mr. Musk agreed to personally buy the
> same amount in Tesla stock.

The extra year of not being chairman seems immaterial if threatening to quit
got the board to shoot themselves in the foot, so he basically paid ~$10
million to loudly proclaim his innocence for 48 hours?

~~~
kirillzubovsky
No, under the settlement he gets to claim perpetual innocence (ie. no
intention of doing $420 on purpose). For him 10m is spare change, so long as
it means he gets to maintain integrity.

Also, as reported in another article, this non-admission of guilt makes it
much harder for the DOJ to go after him with a criminal case.

~~~
vilhelm_s
According to the article, the settlement does not let him proclaim innocence
(but it doesn't require him to admit guilt). As I read the article, this part
was the unchanged between the SEC's first offer and the eventual settlement.

~~~
desdiv
Exactly. The original deal was:

1\. No admission of guilt

2\. Bar from chairmanship for 2 years

3\. $10 million fine for Musk and $10 million fine for Tesla

The final deal was:

1\. No admission of guilt

2\. Bar from chairmanship for 3 years

3\. $20 million fine for Musk and $20 million fine for Tesla

So the 48 hour delay brought Musk nothing in return.

[0] [https://www.theverge.com/2018/9/29/17918252/elon-musk-
tesla-...](https://www.theverge.com/2018/9/29/17918252/elon-musk-tesla-sec-
securities-fraud-lawsuit-settlement-fine-penalty)

[1] [https://www.nytimes.com/2018/09/28/business/elon-musk-
tesla-...](https://www.nytimes.com/2018/09/28/business/elon-musk-tesla-sec-
deal.html)

~~~
Asparagirl
Importantly, both deals also require adding two new independent directors to
the Tesla board.

Who will, one presumes, get to see the company’s books, and then vote on what
to do about those numbers.

------
throwaway_1138
Elon Musk is not crazy or some super genius calculating 20 steps ahead of
everyone else - he is simply a man who does not like being pushed around and
being told what to do. I'm no psychologist, but having read his biography and
having dealt with many adults who were bullied as kids, it makes perfect sense
from my experience as to why he is reacting the way he's reacting. I suspect
that the perception (be it real or imagined) of being picked on, (by the SEC,
by his board, by the short sellers, etc. etc.) might simply be too painful for
him to allow any rational ( i.e. ego-free) thoughts to win out. This and his
inflated ego (a lethal combination) may be the reason he's digging his heels
in.

~~~
erikb
Yes, that's what most people think at this point. If you look at pictures of
his mother you also know who bullied him as a kid (and maybe even today).

------
alphabettsy
This makes no sense to me. If the reporting is correct he screwed up by
sending the Tweet without having an actual deal or planning in place.

I’m hugely inspired by the guy and think he’s brilliant to the point of being
a bit of a fanboy, but I also think everyone should have to follow the law and
play by the rules even if they are brilliant.

~~~
pbreit
He had planned it including a communication to the board. he had talked to at
least 1 investor plus himself so felt he could round up the funding. His other
company has overcome the shareholder limit. He said he was “considering” it.
It was twitter. Shareholders are much better with him at the helm. Etc, etc.

~~~
jonathankoren
This is simply not true.

Having a hunch you can get some money, is not securing funding. This is just
like when Bart Simpson tells Milhouse he can read lips, and then admits he
doesn't know what's being said. ("I thought you said you could read lips!" "I
thought I could!")[0] It's fraud.

He said "funding secured" after an initial 30 minute chat. That's not a deal.
That's not even a verbal agreement to make an LOU. He also did this without
telling _anyone_ on the board. The SEC even released text messages from the
board and staff that directly asked him after his tweet "Is this true?"

Asserting shareholders are better with him, is highly debatable. He has run 3
companies simultaneously, put his brother in charge of one, and then when it
started to fail, bailed it out with a merger with one of his other companies,
then promptly spun up a third company because apparently he has to have three.
The celebrated car company has serious logistics and manufacturing problems,
and is deeply in debt, and doesn't make a profit.

Ironically, what might be his most successful venture isn't even public.

[0] [https://deadhomersociety.com/2013/06/18/quote-of-the-
day-155...](https://deadhomersociety.com/2013/06/18/quote-of-the-day-1552/)

~~~
pbreit
I'm not sure why anyone would think a tweet that included "considering" would
constitute a "deal".

The tweet came from IR, not the board. The board had been apprised of his
considerations.

------
samfisher83
The deal sounded pretty good. They should just fire him. Maybe he is not the
leader they need right now.Maybe he will mellow out after getting fired.

~~~
arthur46363
May be Tesla will get bankrupt

------
apatters
If the fine is intended to be punitive or act as a deterrent, it surely fails.
Musk's net worth is over $20B, so a $20M fine is <0.1% of that. At this rate,
he could violate securities law 999 more times and he'd still be a
billionaire.

It's a joke really, most Americans are lucky to even have a positive net
worth. A traffic ticket hurts your average American much more than this fine
hurts Musk and he committed a much larger crime than parking in the wrong
spot.

~~~
adventured
> most Americans are lucky to even have a positive net worth

The median American has a positive net worth of around $55,000. That's higher
than Germany or Sweden, and just below Finland.

> A traffic ticket hurts your average American much more than this

The _average_ American has a positive net worth of over $300,000 and
represents the fourth richest average of any nationality. As such, the average
American would shrug off a parking ticket every bit as much as Musk would
shrug off a $20m fine.

[https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...](https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult)

~~~
kilburn
These net worth figures don't take into account the differences in social
models. The average German has been paying more taxes for their entire life.
In exchange, their net worth won't be affected if they get cancer, they will
get help if they go broke, etc. Comparing net worth figures directly doesn't
sound fair to me given these differences...

~~~
adventured
Your premise doesn't explain why France - which has a far more expensive
welfare state than Germany - has a median net worth roughly three times that
of Germany and Sweden.

Or why Belgium is nearly 4x that of Germany. Or why Italy is 3x that of
Germany. And so on. It's very clearly a problem that specifically has to do
with Germany. Even South Korea, which has only started to become affluent in
the last two decades, is well ahead of Germany and Sweden (and the US median
as well).

You're also making the excellent point that Americans should be far worse off
than Germans and Swedes, because they should be going broke constantly due to
medical bills. And yet the American median wealth is still higher.

The US spends as much on its welfare state as a percentage of its economy, as
what Canada and Australia do, and is just behind Switzerland.

The median American receives healthcare through their employer. That directly
detracts from their income potential, and given how expensive US healthcare is
(typically 60% to 80% more than other developed nations), it detracts in a
very big way. By your way of thinking, we should account for that massive gap
in cost of healthcare and how it impacts income figures (which impacts max
savings potential). It's certainly not fair to account for Germans paying into
taxes for eg healthcare, while ignoring that Americans lose out on income in
the relationship with their employer due to the immense cost of healthcare in
the US: that is the tax.

~~~
AnthonyMouse
> It's very clearly a problem that specifically has to do with Germany.

It's not even a real problem, because the primary cause is that housing costs
in Germany are much lower than they are in most other places. Correspondingly
the homes people own aren't worth as much, but they don't care because they're
using housing as a thing to live in instead of a thing to prop up their net
worth on paper.

------
rdl
I thought the original deal included a ban on being a public company
officer/director, and the new one was restricted to Tesla. Matters for SpaceX,
which might go public, and which I hope he cares a lot more about than a car
company.

~~~
ubernostrum
Both settlement offers included Musk stepping down as chairman for a period,
but being able to remain as a director.

The suit filed after he rejected the first settlement included the threat of
banning him from serving as a director.

------
olliej
Ignoring everything else it does seem like he needs therapy of some kind, not
for mental health reasons, but for learning to better control his
impulsiveness.

As to any of his other behaviors: ehn. I don’t have enough money to be
effected by his antics :D

~~~
refurb
Didn’t his ex-gf mention he was on acid during the “funding secured” fiasco?

I wonder if drugs are contributing to it.

~~~
JoshCole
No, she didn't.

~~~
refurb
You’re right. It was a random comment by a friend of his gf who claimed to
have visited his house during the crisis.

~~~
justtopost
Who also leaked some other info about elon, from his gfs texts, about things
less concerning to investors, but indicitave that the allegations hold more
weight than just some random comment.

------
bogomipz
>"Mr. Musk threatened to resign on the spot if the board insisted that he and
the company enter into the settlement. Not only that, he demanded the board
publicly extol his integrity."

This sounds as though the board is there to serve CEO. Isn't the purpose of
the board to make sure the CEO is accountable to shareholders? Is the board
just there to satisfy regulatory compliance? What am I missing?

------
paulsutter
He approached it perfectly. I mean seriously, what’s the worst that could
happen? He leaves and the company sells out to Apple? Sure, progress would
slow but Apple wouldn’t bungle it.

Meanwhile he would get to focus on the weightier innovation at SpaceX and The
Boring Company (disclaimer, am a SpaceX shareholder and secretly this is
exactly what I want)

~~~
bicubic
You have SpaceX shares? How?

~~~
nordsieck
> You have SpaceX shares? How?

Presumably he work(s|ed) there.

~~~
Flenser
There is a Paul Sutter at SpaceX: [https://www.linkedin.com/in/paul-sutter-
csp-44270370/](https://www.linkedin.com/in/paul-sutter-csp-44270370/)

But I think it's actually this Paul Sutter:
[https://www.linkedin.com/in/sutter/](https://www.linkedin.com/in/sutter/)

based on these comments:

[https://hn.algolia.com/?dateRange=all&prefix&page=0&sort=byD...](https://hn.algolia.com/?dateRange=all&prefix&page=0&sort=byDate&type=comment&query=by:paulsutter%20altavista)

[https://hn.algolia.com/?dateRange=all&prefix=false&page=0&so...](https://hn.algolia.com/?dateRange=all&prefix=false&page=0&sort=byDate&type=comment&query=by:paulsutter%20quantcast)

So we're talking VC amounts equity, not employee stock.

------
JoshCole
It's so creepy that there is a Twitter account out there which has publicly
confessed to be intentionally spreading hostile news for the purpose of
feeding confirmation bias as a social media experiment and that the stories
they are pushing are turning out to manipulate the news cycle to the extent
that it does. It's actually disgusting, how successful they are.

The entire movement is so suspect when you look at its loudest people. A bunch
of Twitter accounts, many of them intentionally anonymized with troll names,
and photoshopped images of Elon Musk as their profile picture. Hundreds upon
hundreds of retweets of each other. Then mocking nearly every Musk twitter
post with whataboutisms to drag audience to their filter bubble.

Here is raw data about Tesla sales compared to the sales of every other
electric vehicle manufacturer for the last several years:

\- [https://insideevs.com/monthly-plug-in-sales-
scorecard/](https://insideevs.com/monthly-plug-in-sales-scorecard/)

~~~
dayaz36
It's not just twitter it's every sm platform including hn. All the anti-
musk/tesla rhetoric gets upvoted to the top even when it's blatant
misinformation and right wing propaganda talking points. That's why I take all
these comments with a grain of salt. I doubt all these are legit comments.
There could be one person with dozens of accounts, it's not difficult to use a
vpn to cover your tracks

------
yuhong
The fun thing is that being a good CEO/board tweeter is not that difficult.
Some guidelines and judgement would probably be good enough.

------
Apocryphon
Is this him resigning in the same way Yukio Mishima committed suicide?

Hyperbolic, sure, but the article has a Yale prof straight-up invoking
Jonestown in describing this move.

~~~
khazhou
> Is this him resigning in the same way Yukio Mishima committed suicide?

This seems like an obscure reference (I am not Japanese). Care to explain?

~~~
iamdbtoo
There is also a very good movie about this.

[https://www.imdb.com/title/tt0089603/](https://www.imdb.com/title/tt0089603/)

------
_louisr_
Who cares what these dead media companies have to say? Journalism in the 21st
century has a glut of integrity, passion, and ethics. Elon Musk has an
outsized amount of every one of those traits. I don't want to hear a snippet
of a heated board room conversation; I don't want to read a rumor about who
the next chairman of Tesla could be; I don't want to read any sanctimonious,
scowling & contemptuous trash about men so great it boggles the mind. Wake up,
21st century San Fransisco dwelling technophiles & web developers: We have an
enormous glut of people willing to stand up for truth, freedom, and greatness
in America, and maybe we should all cover for our great men when they misstep
instead of sneering about their personal lives or "erratic behaviour". We are
a country of individuals and we would do well to police our criticisms of the
rare individual who can do the thing that needs to be done - accelerate the
transition to sustainable energy.

Comments on "the cult of Musk" or speculations be damned.

------
jaimex2
Whats their source for all this? I can't find it in the article anywhere.

~~~
JoshCole
For a lot of popular press you can check out the confessed social media
propoganda experiment @TeslaCharts for before-it-breaks-on-the-news coverage
of whatever sourceless negative article you want. You can also use it to read
deluded stock analysis talking points, since the goal of the twitter feed is
to produce a profit via a short position on Tesla, many of the narratives are
aimed at influencing stock analysis.

It's hard to predict what will take hold though, since there are literally
hundreds of negative narratives being pushed all the time. It's like a
Nigerian prince scam.

For example, the recent NYTimes article on the Tesla delivery hubs (cast as
parking lots filled with cars that no one wants) were being pushed by the so-
called 'shorty air force', a collection of accounts that look extremely
similar on the surface to political influence campaigns perpetrated by the
Russian Internet Research Agency. Naturally, the sources for this story didn't
want to be identified.

I think this stuff turns out to be surprisingly effective, due to the
generational forces which influence news propagation. A grandmother loses her
fortune when she messes up and gets scammed, but the news makes a bit of extra
money due to increased attention when it publishes the right type of FUD.

Just remember that the account is very explicitly telling you that it does
everything it does with the goal of feeding confirmation bias and that they
are conducting a social media experiment.

Super disturbing results imo. I ended up writing representatives to get them
to look at de-incentivizing bot-based influence campaigns run on the internet
when I got a sense for the direction things were going. Kind of excited by the
fact that the governor passed a law so quickly on the topic. Wheels were
moving way earlier than my writing because of the interest in securing
elections from similar threats.

~~~
jaimex2
Yeah. The fact that I got down-voted for just asking makes me think that crap
actually works.

------
thrill
If Elon has threatened his board, then they need to fire him, or resign
themselves.

------
erikb
The headline is misdirecting. This was the news from last week. Now they have
found a setllement.

------
village-idiot
Let’s be extremely clear here:

That’s fucking crazy. Musk is acting like a crazy person.

Financial regulators are extremely dangerous. They’re vindictive when spurned,
have unlimited resources to fight it out, and are absolutely willing to string
you up to prove a point.

Rejecting a sweetheart deal and forcing your board to fight is nuts. Pride
goeth before...

~~~
pbreit
Based on the actuality I don’t think anything you wrote is accurate.

~~~
village-idiot
What part was innacurate?

------
blihp
Elon probably screwed himself here. The 'fight it', 'ok, settle', 'nevermind'
will not play well on Wall Street. He had a much better chance either fighting
it or settling but now he looks unstable. My guess is we'll be looking at a
Tesla without Musk soon, unfortunately.

------
notaki
This is just another negative Tesla article from the nytimes. Nothing new, and
in the long run it doesn't matter. Elon and Tesla are changing the world for
the better. Tesla is growing exponentially and produced 80k cars last quarter.
That's what matters.

------
starbugs
Musk is just a human like everyone else after all. You know like having
emotions, making mistakes and stuff.

How would you act if you'd come that far and then find yourself threatened by
a horde of wild short-sellers and then the SEC?

Even though his behavior isn't rational, it's understandable to a certain
degree.

What exactly does short-selling Tesla stock contribute to our well-being as a
society? Even though I think it's correct that the SEC fights spreading false
information on Twitter, it must be allowed to ask this question.

I guess Musk should get some sleep, spare some of his fcks about all of this
for later and get someone on his team who is competent enough to talk him out
of certain things when it gets hot.

~~~
legulere
He’s on an ego-trip and he’s out of control. Just to refresh your mind, he
recently publicly accused someone of being a pedophile for criticizing some of
his activities.

