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Elon Musk Settles SEC Fraud Charges (sec.gov)
684 points by omarchowdhury 6 months ago | hide | past | web | favorite | 465 comments

This really doesn't change the status quo at Tesla at all.

We can armchair quarterback the company all day long about whether Musk is replaceable or not, but short of folks that have direct experience within the company we don't really know. What we can say with some confidence is that if Musk were really removed in any meaningful way the market would crush them utterly within hours. The shareholders want Stark Industries, not some near-insolvent car company with severe production shortfalls and a teetering runway.

Professor Aswath Damodaran gave his thoughts on this topic at Nordic Business Forum. (IIRC disclaimer here) He said that he sees some parallels to Steve Jobs, who once almost destroyed Apple and then later saved it - the difference being that on the second time he had Tim Cook. If Musk can find (or if he already has - I have no idea of Tesla management) his own "Tim Cook", then the future of Tesla looks much brighter.

For me this makes sense and I've seen it also elsewhere. The person with lots of energy and ideas may not be the best person to execute things in a corporate context.

As humans, we tend to see patterns wether they're there or not. Jobs and Musk are different people running different types of companies in different eras. There are probably only a small number of people who really understand how Jobs made or Musk makes business critical decisions day in and day out and I'd wager on the opposite that they probably do things fairly differently even if in the outside we see similarities (passion, vision, etc.)

Eh. Yes, we can only use known information and especially with little info, the patterns we perceive won't always be perfect. But applying those labels seems to have enormous value anyway. Reddit recently likes to compare Musk to Trump. And while i disagree with that comparison on most aspects, it did help me realize their social media usage patterns are a lot more similar than I'd like. Of cause this particular comparison got a lot harder to do, now, since the US seems to hold a CEO & Chairman to higher standards...

He's got Gwynne Shotwell running SpaceX he needs a Gwynne of Tesla.

These orders in the settlement with Tesla mean that Musk cannot say in public things about Tesla anymore without proper supervision from the company. At least, he cannot say exciting, Stark-Industries-like things anymore. I let you decide if this change is removing him in any meaningful way.

"(b) create a permanent committee (“Committee”) of the Company’s Board of Directors, consisting of independent directors only, overseeing the (i) implementation of the terms of this Consent and incorporated Final Judgment; (ii) controls and processes governing the Company’s and its senior executives’ disclosures and/or public statements that relate to the Company; and (iii) review and resolution of human resources issues or issues raising conflicts of interest that involve any member of executive management. The charter and composition of the Committee is subject to review and approval by the staff of the Commission;

"(c) employ or designate an experienced securities lawyer (“Securities Counsel”) whose qualifications are not unacceptable to the staff and maintain such counsel (or a successor Securities Counsel) for so long as the Company remains a reporting company under the Securities Exchange Act of 1934. The Securities Counsel will review communications made through Twitter and other social media by the Company’s senior officers in a manner that is consistent with the Company’s disclosure policy and procedures, including the procedures and controls referenced in subsection (d) below, as well as advise the Company on securities issues, including, but not limited to, compliance with all federal securities laws and regulations;

"(d) implement mandatory procedures and controls to oversee all of Elon Musk’s communications regarding the Company made in any format, including, but not limited to, posts on social media (e.g., Twitter), the Company’s website (e.g., the Company’s blog), press releases, and investor calls, and to pre-approve any such written communications that contain, or reasonably could contain, information material to the Company or its shareholders. The definition of, and the process to determine, which of Elon Musk’s communications contain, or reasonably could contain, information material to the Company or its shareholders shall be set forth in the Company’s disclosure policies and procedures;"

Edit: I wonder what the SEC will think about “leaked” internal memos like https://www.bloomberg.com/news/articles/2018-09-30/tesla-ver...

The really interesting part is the need to appoint two independent directors. Currently, Tesla's leadership could best be described as a monarchy, with King Elon appointing family and favoured friends. That will have to change now and I think it will be quite telling who ends up in the role as well as how long they remain at Tesla.

> This really doesn't change the status quo at Tesla at all.

It just subtracted $40mm from the status quo and, moreover, will likely have negative repercussions on the company's ability to raise capital in the future.

$20 million. Musk pays the other half personally.

I think Musk technically pays the full 40M through some stock purchase.

> likely have negative repercussions on the company's ability to raise capital in the future.

Perhaps the increased independence of the board will facilitate raising capital?

But they won’t find Musk when watching Iron Man or Avengers.

To find him in film they have to watch the Greatest Showman.

They'll find Musk in Iron Man 2

Honest question: Does it really matter if he loses the chairman role? Or even if he lost the CEO role? If he was busted down to VP of Engineering he would still be a major shareholder and everyone would did what he said right? He just wouldn't have any "official" corporate leader responsibilities (quarterly calls, etc). Or am I totally wrong?

He will still be the most powerful single person at Tesla, but this at least opens the door for him to not be the most powerful entity at Tesla. There is no way of knowing when or even if the Tesla board will start saying no to Musk, but this at least makes it possible for them in the future. That is a good thing in my opinion.

In fact, I think a Tesla shareholder should be pretty happy with this settlement. The $20m fine at a time when Tesla is already running low of cash is certainly tough news, but every other part of this settlement is probably good news for the company's long term health. It is also obviously a lot better than some of the punishments people were talking about earlier this week.

Musk is covering the fine to Tesla by buying $20M of Tesla stock. https://www.nytimes.com/2018/09/29/business/tesla-musk-sec-s...

Interesting excerpt from that NYT article - "The terms of the settlement are slightly tougher than those that two people briefed on the talks said Mr. Musk had rejected on Thursday, which called for a two-year bar on serving as chairman and a $10 million fine."

It got harsher just after one day

I dont see how that's covering if he's still getting $20m of tesla stock

I don't know the terms. I'm assuming that this is a new issuance at the current market price and thus would effectively provide $20 million of additional liquidity to counteract the cost of the settlement.

The details will surely be disclosed.

But the company could get approxately the same amount of cash by selling the new issuance on a public exchange.

Maybe not, if the stock is already dropping. This affirms the current price to some extent.

Assuming he is buying newly-issued shares from Tesla, then the money goes directly into their treasury. So, the company will have $20MM more in cash than it did the day before.

He is still getting something out of that transaction. That's like saying buying food at a restaurant is a donation.

I'm no finance person, lawyer, or anything like that. But I suspect that he can't just give Tesla money and it has to be in exchange for something, such as stock.

It will cost the company 20 million yes but will not affect the free cash flows

If it's newly issued the price will be dilution of the other shareholders stock. I guess it's a smallest burden on Elon and the rest of the shareholders.

And all existing shareholders will be diluted by the issuance of those shares.

The shares would lose value via dilution or via a new $20 million debt, this is just an easy way to get the cash on hand.

I meant "covering" in the context of the parent commenter's concern about cash flow. He's not donating the money to Tesla, but he's preventing the fine from making their cash flow worse.

Buying stock on the public market doesn't affect Tesla or its cash flow at all. Tesla is not the counterparty in this transaction.

That wouldn't make sense. Do you have a source?

He's not covering anything, and unless he buys it at the price it was right before he tweeted it's arguably another instance of securities fraud.

For those wondering why, look at the comments elsewhere in this discussion about how the $20mm owed by Tesla will cause them to run out of cash sooner.

I don’t think “covering” is the word you’re looking for here...

Ah yes, just keeping leveraging against debt!

> I think a Tesla shareholder should be pretty happy with this settlement. The $20m fine at a time when Tesla is already running low of cash is certainly tough news, but every other part of this settlement is probably good news for the company's long term health.

Hi there. More than 1/4 of my net worth, and over 1/2 of my equity holdings are in TSLA. I agree with every word of this. The $20M hurts, but on net, I think this is better for Tesla than if Elon had won the lawsuit.

You do you, but having 1/4 of your net worth in any company is extremely risky and ill-advised. I hope it works out for you, but I also really hope you diversify your portfolio.

Granted, we know nothing about the person's current life circumstances, but this is really good advice.

I mean it's the most generic advice you can give. Maybe he enjoys believing in a single company and taking risks. Maybe he's totally fine even if he lost it all. People spend more than 1/4 of their net worth's on hobbies, but suddenly if you have 1/4 of your net worth in a single company it's a disaster and you are crazy.

Maybe he invested 2% of his net worth in Tesla at the IPO, was determined to hold the shares for at least 10 years until they executed on their vision, and has been too stubborn to sell until now.

Re-balancing your portfolio after things have started to go very, very well is certainly sound advice, and so is selling all your equity in a promising startup the moment it has significant market value (it will most likely still be worthless).

Yeah, this is closer to how I got here (cost basis is way more than 2%, but nowhere near 25%). As you hint at though, there's a cognitive bias in holding my position by this reasoning -- my gains are a "sunk benefit" and I am where I am regardless of how I got here.

For me, it boils down to two things:

1. I'm pretty conservative with the rest of my money (index funds, rental property). If Tesla went bankrupt tomorrow, I'd be fine. Don't get me wrong -- it'd be a bad day. But the financial hit wouldn't threaten my long-term happiness.

2. I only buy individual stocks when I feel the market has wildly misjudged a company. Tesla fit this to a tee, particularly (but not exclusively) in the early days. I took a large early position and have been buying dips along the way (yes, still). By my judgment, a dollar invested in Tesla still has a much higher expected value over 10 years than a dollar invested in any other equity that I feel qualified to assess. I would love to diversify the highly aggressive part of my portfolio, but hard as I try, I cannot find a deal this good in any other public company. So I've decided how much I'm willing to lose on what I believe is a great bet, and have invested accordingly.

I agree with your reasoning.

Came to echo this sentiment, though don't know how old you are, and if in fact you are being 100% truthful. Having that much in a single highly risky company under intense conditions is not a sound investment strategy. Rolling the dice, just know the risk.

I'm being 100% truthful, but I recognize that saying this doesn't establish any additional credibility. :)

I didn't mean to make this about me or my investment strategy. I was just trying to back up the sentiment that the poster above me expressed -- that people with skin in the game will see this settlement as a great thing for Tesla. I have a lot of skin in the game and that's exactly how I feel.

Congratulations on the $TSLA rebound today. Best of luck, just to risky for my blood especially to have such a large position.

1/4th of my $500 net worth! :P

> More than 1/4 of my net worth, and over 1/2 of my equity holdings are in TSLA.

No offense, but why???? It is crazy to have this much of your meet worth in ANY single company. I can only hope that you are independently wealthy and if TSLA went bankrupt (of which there is a very large possibility) that you'd be ok.

Interestingly, I was hoping the OP is a poor college student for whom 1/4 of their net worth isn't all that much money...

Well arguably it would be even worse than.

I think it's save to say that the relative amount of money lost is more important than the absolute money lost for most people

If his net worth is $1k, with $500 in cash and $250 in Tesla that makes perfect sense.

Under 35s median net worth is $4k


If your earnings are likely to go up dramatically later, then it's fine to take large risks with the money you can invest now. Unless you have large gains, it's not enough money to make much difference anyway.

This assumes of course that you've got the basics covered, like being out of debt and having some kind of emergency backup (savings, insurance, well-off parents, etc).

The only way this could make sense would be if OP was an employee recieving stock they are not yet allowed to sell.

What the others already said; also, I am reminded of Enron and the stories almost 20 years ago of people being wiped out due to the Enron collapse. My internal reaction at the time was "diversify a little."

Or hedge with some puts, or something, to limit your downside risk.

Due to the volatility and the extreme short interest, those puts are quite expensive, and have been for years ;) You could certainly buy out-of-the-money options at 50% of the current market cap expiring in the next quarter, and been doing so regularly during the last five years during which Tesla's prospects have seemed quite dodgy.

But it would have more or less have wiped out your upside. So if that's the insurance you would have liked for such a risky investment, it would have been better to just invest in something else.

I was thinking that one might partially cover (e.g. buy puts for 25-50% of the value of their portfolio) but you're right. the risk premium should be exactly equal to the expected profit on the asset, if the world works the way theory predicts.

Just FYI, but when you hedge with puts your holding period to realize long term gains instead of short term gains gets reset immediately, then you have to wait another year after you close the put position before you can sell as long term gains. Just something to keep in mind.

Interesting, yes, since the ownership of the put is an equivalent to a sale, yes?

I'm a Tesla shareholder and I'm extremely hopeful, an independent chairperson could really cut down on the nonsense that makes the company off-putting to some investors. Just as Google needed an adult in the form of Eric Schmidt, Tesla needs someone who can collaborate with Musk. Eric Schmidt would be perfect but he's probably conflicted out because of Alphabet's Waymo. Though I'm hopeful that they'll find someone who can help Musk achieve goals and instill some discipline and sternness where needed.

However, it could go awry. If the independent board member were to try to combat Musk and get the company wrapped up in internal struggles, it could go badly for the company.

Fun fact. Eric Schmidt was 45 when he was ‘the adult’ who joined Google’s board of directors as chairman in March 2001. Elon Musk is 47.

Worth nothing that Schmidt probably behaved like a 45 year old when he was 30 and Musk behaves like he's 22.

I suspect it would matter, for at least two reasons.

For that to work, you'd need a particular sort of senior management arrangement, not just to leave him alone, but to take a lot of heat for his eccentricities. You need particular people capable of forming unusual understandings for that to work. And there would also necessarily end up being limits - there's only so far folks will cover someone else's bets.

The second reason is Musk's ego. I think he'd find a demotion humiliating, and if he's not treated as a Master of the Universe Superhero-CEO, I bet even money he'd behave worse, pick fights with his minders, etc.

Research what he did when he was fired as CEO of PayPal. He made sure the company had good management by making sure Peter Thiel came back (even though they weren't the best of friends at the time), and he stayed quiet, allowing the team to execute and make him rich. Now that you know this, will you update your beliefs about his ego?

Everything I could find says the board asked Thiel to come back, not Musk... In fact, supposedly they fired Musk and hired Thiel back while Musk was flying internationally, and had announced they change at CEO before he landed.

Knowing that, it would explain his tendency to make sudden pronouncements and try to stay at the office/factory at all hours.

Went back to the sources, and it seems you're right on the Thiel thing. He did make peace with Thiel and Levchin pretty fast though, and even invested more money into paypal after he was kicked out (citation: the Ashley Vance book on Elon) which was my main point -- he didn't blow shit up or incite a rebelion, he just stayed on the sidelines and supported the team like a trooper.

You made two separate points, and the one you lead with was that he recruited Thiel after being fired... which isn't true. Also, "not blowing shit up" especially when he has money involved != 'staying on the sidelines and supporting the team like a trooper'.

Essentially, he's egotistical, but if someone forces him to back down, he's also mature enough to handle it.

You mean like how he has doubled down twice on accusing a random diver of being a paedophile?

Not a random diver, it was someone who was a domain expert and dared to critique the proposed engineering solution from Musk.

You can draw a very short dotted line to all the automation they eventually had to rip out of the Model 3 production line.

On the plus side he's a visionary with a lot of cash. The downside is that his ego wont let him take advice from people he doesn't agree with.

The latter character flaw is a recipe for disaster if left unchecked over the long term. This move is good for Tesla.

Tesla wouldn't exist if Musk took "advice from people he doesn't agree with". It's easy to point to model 3 production but what about all the other instances he has proved the nay sayers wrong? Entrepreneurs are generally not people who take advice from people saying it can't be done, instead they prove it to themselves.

That's fine when your a startup but as the business matures you're approach much reflect the shift.

> You can draw a very short dotted line to all the automation they eventually had to rip out of the Model 3 production line.

Given his large-scale visions, I suspect the attempt at extreme automation was intended as a proof of concept about fully automated manufacturing for off-planet use.

> critique

Elon Musk should not have said what he did, but advocating for sodomy is not critique. Some cultures have the death penalty for sodomy whereas the acceptance of critique is celebrated as wise in most cultures. The character flaw of the news is that in cases like this, it does not seek to create a peaceful resolution between the two parties, but instead blows up their differences as much as possible. Both of these men tried to save the lives of kids.

I agree that Twitter censure is likely to be of benefit to Tesla. Starving the news of Elon Musk content is a good thing. It will hurt the profits of attention-derived news. Plus, the doom of the ICE industry is rearing its head. So they can talk breathlessly about that and criticize the existing auto manufacturers for not seeing the writing on the wall once they figure out a new strategy to maximize their attention derived profits. I'm cynical enough that I figure this story shift will probably happen around the time that Tesla starts taking out television ads.

Wu... wut? "Advocating for sodomy is not a critique" ???

What Elon did:

> Elon Musk has escalated his baseless attacks against a British diver, claiming without evidence that the man who helped rescue children from a cave in Thailand was a “child rapist” in an email to a reporter. [https://www.theguardian.com/technology/2018/sep/04/elon-musk...]

Yeah, the news doesn't really bother giving the full story with much subtlety. You can go look up what the guy actually said. There is a video of it. Basically, he figured that Elon Musk was trying to help just to look good with no substance behind the action. So he told Elon Musk he should shove the submarine that they (SpaceX team) built up Elon's ass. Pretty poor showing all around.

Makes for a great story though. Much outrage. The madder you are, the more irrational you have become? The better. Many clicks. Much profit. Much circus. Totally get why the reporter violated the principle of off the record conversations in order to earn themselves money and create drama. People make money, because you just linked this article. That is how this works. This is how social media generated news tends to make its money. If the story didn't outrage you enough for you to share that link with me? They failed.

But don't let them delude you into thinking its in the best interest of either party being reported on to be known for their worst moments. Nor for the public opinion of both people to be shaped by these moments. Both of these people tried to save the lives of children. The character of both people are very likely to be somewhat congruent with that. I presume innocence until shown otherwise with regard to the accusations leveled. It isn't a story of interest to me without evidence which backs it. I refuse to join either mob.

Saying "shove it up your ass" is a common idiom that is, while rude, not "advocating for sodomy".

(Which, by the way, is something that is generally A-okay - "sodomy" refers to gay (usually anal) sex, and Western societies have generally decided that's not a crime anymore.)

Wow, okay. This is still an incredibly bizarre point:

>Some cultures have the death penalty for sodomy whereas the acceptance of critique is celebrated as wise in most cultures

Anyway, he actually said Elon Musk to "stick the submarine where it hurts" and called it a PR stunt. Elon then responds with this tweet, which I think is relatively appropriate:


Elon then also made this statement:


And a series of other tweets doubling down on the sentiment. This is insane and depraved. You can argue that this is all inflamed by the media, outrage culture , etc, but at the end of the day, the CEO of a hugely popular tech company took to twitter (where he has 23m followers) to spread vile and baseless accusations about someone.

He made these tweets originally and publicly in JULY. It was only recently (and after apologizing) that he REPEATED the accusations to Buzzfeed news. And the buzzfeed reporter also preempts your accusations that the emails were leaked improperly ("He prefaced the email with "off the record" though I did not agree to that condition. Off the record is a two-party agreement.")

> Both of these people tried to save the lives of children

Yah, sure. But one of them also took to their social media and their millions of followers to accuse the other of being a pedophile, and then repeated the accusation, and then apologized, and then REPEATED the accusation again months later. With no proof. And so Musk can both be someone who tried to save the lives of children and a piece of garbage who is prone to emotional outbursts that can do real damage to real people.

> This is still an incredibly bizarre point:

Yeah, bad way to make my point. I know that there is very clear adversarial search for and an adversarial amplification and adversarial provocation of all Elon Musk's flaws. This amplification involves a game of telephone in which their is mounting outrage which turns 'shove it where it hurts' into 'dared to critique the proposed engineering solution'. I'm trying to introduce reality again in the hope of stopping the mob mentality death threats toward Unsworth and the harming of the mission of electrification of transport. People are intentionally trying to help feed this system, to see what happens [1]. I've seen enough of what happens to know this is a bad idea.

Pretty sure the right thing to do is let the conversation die. Due process will bring much more justice than social media amplification.

[1]: https://twitter.com/TeslaCharts/status/1008405211432570880

I still don't see how that really applies. I agree that Musk is subject to a lot of scrutiny, and a lot of negative coverage in general. But in this case, he is absolutely in the wrong, and what he did and continues to do is despicable. This wasn't a case of the media taking his statements out of context or misrepresenting his views, and it's disingenuous to try and roll this event into the category of 'unfair media sensationalism'.

I think you are trying too hard to defend Musk. There is (to me) an immeasurable difference between "shove it up your ass" (which is telling Musk to do something), and "you are a paedophile" (which is saying the diver is a something, for which in almost every country in the world you would go to prison for). He then repeated the accusation, repeatedly, saying he is sure it is true.

The guy is now suing Musk, which really is (in my opinion) his only choice, as otherwise many people might assume the accusation is true (as Musk is so sure, and even asked why he wasn't being sued as a response)

> There is (to me) an immeasurable difference between "shove it up your ass" (which is telling Musk to do something), and "you are a paedophile" (which is saying the diver is a something, for which in almost every country in the world you would go to prison for). He then repeated the accusation, repeatedly, saying he is sure it is true.

> The guy is now suing Musk, which really is (in my opinion) his only choice, as otherwise many people might assume the accusation is true (as Musk is so sure, and even asked why he wasn't being sued as a response)

I agree.

A corollary of this is for-pay news cares more for its readers than free news. You ought to pay for your information, if you want to incentivize getting good information.

Perhaps it's more accurate to say he's driven, no nonsense and shrewd?

Yeah. Of course he wears his ego proudly. You don't rise to that level without above average chutzpah. But I think that's more a side show than the featured event.

Yes, that's the gist I got out of his behaviour at X.com when they merged with Cofinity as well (from the book The PayPal Wars). He wanted to turn it into a full Microsoft shop, and and he wanted to change the name to X. To sum it up: people disagreed, and there were setbacks after setbacks with the former. When he put through the latter, there was a small internal struggle and Peter Thiel become interim CEO.

Not the OP but having followed Musk for a long time, I think his ego is enormous and that PayPal anecdote doesn't change that. Few people are more sensitive to criticism than Musk.

The chairman has the power to appoint members of the board, the board has the power to fire the CEO. So someone who's both chairman and CEO is virtually impossible to fire.

The combination of removing Musk as Chairman and adding two independent directors means there's a slim chance that he could eventually be fired – more likely, it means that Musk will be held more accountable to the board.

It matters quite a lot.

There are specific jobs that board members and officers have. Just having 'the most shares' often isn't enough to do everything you want.

Moreover, he only owns 20% of the company.

Being 'busted down' is a huge political blow, he would be seen as weak, it would be hard for him to do his job.

He could resign as Chairman and save face, and then say 'Ima do Engineering full time' or something but it'd be hard for him to go as CEO.

> Moreover, he only owns 20% of the company.

There's nothing only about owning 20% of a public company.

20% and the largest shareholder, is more than enough to turn any public company inside out. Hedge funds do it all the time with dramatically weaker positions of single digit ownership. Carl Icahn routinely does it with a few percent. It's an immense position in the public markets in terms of wielding power.

20% is not enough, you need to wrangle the remaining votes which is not a sure thing.

'Hedge Funds' do this by forming a cabal with other funds and institutional investors.

This is totally unlike Alphabet or Facebook etc. where there is real and direct power.

I don't doubt is shareholders really wanted him gone they could punt Musk.

Appointing the 2 additional board members now means Musk can be outvoted. His 20% holding doesn't give him majority vote.

I've seen that pattern too but I don't get it. Why would single digit percentages matter that much?

It matters when it's a big chunk and the fund leads a movement among shareholders many of whom may be tiny, dispersed, or possibly passive.

It might actually help a bit as he seems to be burning out from “120-hour work weeks” (https://entrepreneurs.maqtoob.com/why-elon-musks-burnout-is-...)

The Chairman role is largely symbolic. I seriously doubt that if he gave it up, it would reduce his work load.

EDIT: largely. In a company like Tesla, with such a strong CEO, the Chairman would be a symbolic role. In a very large and sprawling company (PepsiCo?), it wouldn't be so symbolic.

> In a company like Tesla, with such a strong CEO, the Chairman would be a symbolic role.

In a company like Tesla, that has been sanctioned by the SEC for failing to adequately control the public actions of the still-current CEO, it's unlikely that the Chairman would be a symbolic role.

So he made one big mistake. He's done a lot of good stuff. He was punished, he's done a lot of good for the world. Compare him to the heads of banks and financial orgs in 2008, people doing credit default swaps,, the entire financial world that takes a cut out of most transactions for no good readon, like ipos. He's a huge net positive for the world.

I don’t think the point of the comment is at all related to what Musk has or has not done, nor his value as CEO. The point was that after a public censure of a CEO and company, the subsequent Chairman would be expected to work towards preventing a similar situation and would have the authority/mandate to do so.

Edit: use Musk’s name.

everyone would did what he said right?

You'd get into even more trouble with the SEC if you ran a public company where the executives and officers are not what you claim they are but are stand-ins for someone else.

There are specific things that are the role of the top level executives, like certifying the company's SEC reports. But I'm not sure how having someone other than Musk independently and competently do those things would be expected to hurt anything.

Meanwhile, wouldn't it be completely normal and legitimate for a company to give the VP of Engineering or Operations a free hand in making engineering or operations decisions?

This. Tesla is a publicly traded company. It makes clear, legally-binding representations of who its officers are and what its organizational structure is. If Tesla represents that Musk is not longer a chairman, while in fact he is, then that's (again) investor fraud.

> Or am I totally wrong?

You are right. In most public companies, it would matter greatly since the chairman is the most powerful person in the company ( CEO reports to the chairman ). But as you noted, musk is the largest shareholder, but more importantly other large shareholders ( especially the institutional shareholders ) back him. So he would be in charge regardless. But removing him from the chairman is optically damaging, so it's not insignificant. It matters, but not as much as it would normally.

It would matter if there were someone else in the company in a position of higher authority who could say "no" to something Elon wanted to do, even if it only happened rarely.

Not much, the Chairman role is mostly symbolic. This will not have any day-to-day consequences.

Not true, I have a chairman, I answer to him and I don't have the SEC watching me.

Elon's chairman will be under scrutiny by the SEC to keep an eye on Elon from the inside.

I expect the stock to pop on Monday given this slap on the wrist

This is good news for nerds who believe tech can be used for more than developing advertising platforms.

Everyone anywhere near Elon should do one thing: encourage him to get the hell off Twitter. Social media is bad for everyone, but it seems worse for certain personality types.

Please Elon, quit twitter. Even for a year.

Twitter seems more like a symptom than a root cause here.

It's a facilitator of bad habits. Telling him to leave Twitter is like telling an alcoholic to get the alcohol out of his house. In either case it's a good first step.

But more directly, everyone makes mistakes and we make more rash decisions when we're stressed. At least without Twitter, his spurts of irrationality from being overwhelmed can be kept private and not affect his business.

I once heard that root causes are almost never fixable, so pretty often the best that can be done is a few levels up.

The root cause of anything is probably something like mortality, human frailty, the laws of physics. We are very far from fixing any of those.

Twitter on the other hand can be changed, and probably some people on this very site work at Twitter and can (and should!) make socially responsible changes. It's not the root cause of anything but it has plenty of influence.

This is an incredible insight. Thank you so much for sharing it.

> I once heard that root causes are almost never fixable

I think we are playing with the definition of root cause here.

He got the boring company where it is right now because of Twitter.

Yes, I know. And some other things happened due to Twitter.

But you don't do things just because they have _some_ upsides; you've got to take the balance. And I think it's been a clear net negative - e.g. potentially losing control of Tesla.

You don't think Twitter was critical in building Musk's brand and investor interest?

>social media is bad for everyone


Someone is wrong on the Internet. Quick, attack!

A bit anticlimactic. The only reason the SEC brought charges publicly was because Musk refused the first settlement offer (with similar conditions) anyways.

well it turned into a classic no admit no deny settlement

this is a much better settlement and easier to swallow.

if he had to admit it then the criminal charge would have been emboldened. unfortunately the settlement itself can still be used as ammunition, but it is contains no admission (or denial) of guilt.

The proposal they previously rejected had an offer of no admission of guilt as well.[1] It's a very slightly worse settlement now, the apparent duration that he is barred from the chairmanship was increased by a year.

Most likely Musk wanted the optics of declaring himself innocent, rejecting the offer and feigning a fight. I'd be surprised if everyone around him have not been encouraging him to settle, the downside risk was far too great vs the modest settlement pain.

[1] https://www.cnbc.com/2018/09/28/teslas-musk-pulled-plug-on-s...

I've been wondering if he didn't settle because he wanted to gauge the reaction to fighting it out. Like you, I bet there was a lot of pressure put on by stakeholders to negotiate a settlement once it became public.

I have been thinking of admission of wrongdoing in lawsuits for a while now.

There’s the still the DOJ investigation, so he’s very much in potential hot water, albeit less so than before. The odds of him facing criminal charges was always lower than the civil side, but he’s still at risk. Plus, he’s still facing a raft of civil suits beyond the SEC, even beyond the one from the man he kept accusing of being a pedophile.

> so he’s very much in potential hot water

I don't think so. He was in much more risk before, with SEC investigation. The accuser in civil suit is asking for $75k worth of damages. I think Musk can pay off that fine and be free from it. I guess there will be no jail time. Although, i'm not a lawyer.

The defamation accuser's complaint alleges compensatory damages "in excess of" $75k only because it's a jurisdictional requirement for US federal court. He will seek much more at trial, plus additional punitive damages.

Yeah he will, and he'll get paid and it will be junk money to someone like Musk. That's not the DOJ case anyway.

Plus, he’s still facing a raft of civil suits beyond the SEC, even beyond the one from the man he kept accusing of being a pedophile.

As I said, beyond that suit, i.e. the suits he’s facing over the tweets. And the DOJ investigation.

At the last Tesla shareholder meeting five months ago, some investors wanted Musk to give up the chairman post (while remaining CEO of course) but he refused: https://www.google.com/amp/s/www.apnews.com/amp/386447de1b8a...

Would have saved $40M cash and billions in shareholder value if he’d taken the hint then. Nobody should think themselves that irreplaceable.

It wasn't just Elon who turned that down, it was put to a vote and "More than 86 million shares voted against the proposal at a shareholder meeting in June, while fewer than 17 million voted in favor, Tesla said."


If Musk had come out in favor of the proposal and said: “Yes, it would actually be a good idea to hold Tesla to a higher standard of corporate governance and have someone take on part of my workload, so I’m not going to vote for myself” — do you think he’d be chairman against his will?

If he wasn’t chairman, they couldn’t have taken that away from him in the settlement, so he might have suffered a different punishment.

My train of thought was that Musk probably wouldn’t have ended up tweeting “funding secured” in a situation where he’d be accountable to an external chairman of the board. A bit of governance might have been useful these past months.

Exactly. It wouldn't have been his place to negotiate, not without chairman approval, and certainly not by himself. There would have been an adult in the room.

They likely would’ve just pushed for more independent board members.

It’s very clear what the SEC has done. Which is send a warning sign that this is Musk’s last chance before he is fired.

I don’t think they wanted to punish him any more than that.

Shareholders massively voted that initiative down.

Strong disagree.

Leadership is key. I dont like Elon's propaganda machine which IMO is what feeds his cult status, but HE is the reason Tesla is a thing.

Believe in Him. Tesla as a company has no chance against GM or Ford. Elon has a chance because of what he has accomplished.

They say history is events and people. Electric cars are something every company will have in the next decade. What company is going to get an Elon?

> say history is events and people. Electric cars are something every company will have in the next

That's one view of history - popular in common discourse and historians.

Another view of history is that it is largely driven by economics with historical personalities riding on the coat tails of underlying situations with a very few unique genius exceptions (think Newton, Alexander, Ceaser etc). Also remember that most of history has happened when our population has been 1/20th of what it is today - so we are 20x more likely to have interesting characters even if something depends on genius

It remains to be seen what Musk will be - I actually feel underlying economic growth, material science development in battery technology and need to tackle pollution especially in Asia would have anyways driven electric vehicles rapidly and indeed I wonder if Musk jumped the gun on battery giga factory since we're just at the beginning of battery science - but time will tell.

The true heroes - the actual researchers and engineers putting in ridiculously long hours out of pure passion and thereby making the steady stream of breakthroughs necessary to allow new technologies to flourish - rarely get any press or credit.

However, there are circus ringleaders (as Elon has been accused of being), and then there are true polymaths who can both competently direct large scale engineering efforts and deal with entirely disparate realms such as corporate governance, marketing and negotiations. He may not have been getting enough sleep lately, but I think he's more the latter than the former. You don't get put in charge of revolutionary payment systems, luxury vehicles, interplanetary transport and energy storage one right after another purely by accident.

>Elon's propaganda machine


Man that guy sounds so smart in retrospect. My props to him as an investor

As a fan (not shareholder, unfortunately) of Tesla, this is great news. When I think of Elon Musk I sometimes think of the movie version of Patton. Hopefully this gets him to settle down on a bit of the drama, and focus on making Tesla succeed and getting SpaceX to Mars...

Honest question - what's the rationale of being a fan of a CEO? I can understand being a fan of an actor, a sports professional, but a CEO? I sincerely don't get it.

I am a pretty big fan of Elon, I’ll explain how I think about it. To me, it’s not about being a CEO, it is about rooting for a visionary. I want Elon, and his missions via various business ventures, to succeed. The success of an actor, athlete, etc will have zero inpact on me personally. Some of the things Elon and team are trying to accomplish, could materially change my life, as well as many others. It feels much more real, more connected to me. Yes, maybe his methods/antics are silly at times, but he’s human, and trying really difficult things that may improve the world (subjectively). Why wouldn’t you want to be a fan of the things he is doing?

Fair enough.

> Some of the things Elon and team are trying to accomplish, could materially change my life

Like what specifically?

> Why wouldn’t you want to be a fan of the things he is doing?

I guess I could be a fan of what he is doing, but not how he is doing it. A few reasons:

- Concentration of wealth to him personally at the expense of my tax dollars (just look at how much of Tesla has been subsidized by the government)

- Tesla is questionably a sustainable company. I think Musk is a visionary from a product/market perspective, but his operating capabilities are questionable.

- You don't need cheerleaders for a more sustainable environment, you need paying customers of environmentally friendly products/services and operators who are fiscally responsible to deliver those goods. I would be cheering like you if he spent more time figuring out how to make his supply chain sustainable and less time touting himself on twitter and attacking his perceived enemies.

- He's demonstrated that he believes he is above the law (SEC) and above respectful discourse ("pedo" comments). Certainly not the type of leader I want my future kids to follow.

I grew up watching Michael Jordan and was a huge fan of what MJ did for the game of basketball. As I grew older, I learned he has a huge gambling problem (that got him into a lot of trouble), he regularly bullied players (teammates and friendly opponents) and is generally not a likable person.

In other words, the end doesn't justify the means for me.

> Like what specifically?

Owning an electric vehicle. I'm currently starting a house remodel, if I could afford the solar roof, I would get one. I still may get the power wall as an energy backup. The price points of these are all high, but the assumption is that as the tech and supply improve, the price drops.

> Concentration of wealth to him personally at the expense of my tax dollars

Agree Elon has accumulated a lot of wealth but he also invests a lot of his wealth into businesses and takes risks with his money. Capitalism rewards people with more wealth if they are good at what they do, I don't mind that. I also don't think he hoards it in the same way as other billionaires. RE Subsidies - other energy companies also receive large subsidies. I may not agree with subsidizing these companies but I prefer to subsidize clean energy ventures vs coal.

> Tesla is questionably a sustainable company.

We should all find out in the next year or two, will be fun to watch.

> I think Musk is a visionary from a product/market perspective, but his operating capabilities are questionable.

If first part is true, does second part matter? Not to me.

> You don't need cheerleaders for a more sustainable environment, you need paying customers of environmentally friendly products/services and operators who are fiscally responsible to deliver those goods. I would be cheering like you if he spent more time figuring out how to make his supply chain sustainable and less time touting himself on twitter and attacking his perceived enemies.

Totally agree with you on this part.

> I grew up watching Michael Jordan and was a huge fan of what MJ did for the game of basketball. As I grew older, I learned he has a huge gambling problem (that got him into a lot of trouble), he regularly bullied players (teammates and friendly opponents) and is generally not a likable person.

Good points. I think Elon should give his teams more credit and I've read stories he can be an asshole- I'm not a supporter of the Steve Jobs bullying mindset and believe you can succeed while being nice. Maybe this is one of his biggest areas for improvement. But I've also seen a lot of interviews where Elon seems sensitive, kind of misunderstood and like he really cares about doing a good job and doing the right thing. He's definitely not perfect and I think people expect him to be which has got to be tough.

Thanks for the thoughtful reply!

Because Elon is not just a CEO - he doesn't sit there, manage some corps and rake in cash. He's a man on a mission, for whom companies are means to an end (human presence on Mars). You can be a fan of someone who's trying to achieve a particular dream, if you share that dream.

Tesla has a mission, sure, but Elon has various missions and values. I share some of those, but not all. He seems to be a huge Microsoft proponent; I'm not. However I believe the time to drastically reduce our dependence on fossil fuels is due. I'm neutral about Mars because I believe we should focus on more dire problems such as our environment. My point being: you do not have to agree with all of his values.

No one says you have to. I consider myself a Musk fan, and I share most, but not all, of his values (at least of those I know of). I do in particular share his vision about space and energy.

How does being a fan of an actor or sprouts professional make sense? It's not rational at all. I think you just give it a pass because it can be ascribed to fall under the category of "aesthetics", in which we've generally agreed as a society not to question someone's right to an opinion.

What's so strange about it? He's a person that, through talent, luck and effort, has become really good at what he does, just like good actors and sports professionals. And what he does has much more impact on the world that what an actor or sports professional does.

I can understand much more being a fan of Elon than a fan of a sports professional. One could say Elon is changing the world, or at least trying to, and is trying to accomplish dreams (going to Mars for example).

If he has time to make tweets like that, his priorities are incorrectly ordered. It happens to the best of us, though.

Elon Musk and Tesla are still facing:

- A DOJ criminal enquiry into the same 420 tweet

- A whistleblower suit about misrepresentation of its rate of vehicle and battery production

- Another whistleblower suit about covering up a large theft and a narcotics ring

- A class action over racism

- Complaints about union busting

- A defamation suit over pedo accusations

- Investor class actions over the Musk family bailout acquisition of Solar City

And probably lots more that we don’t yet know about.

That so many people in tech are holding this stock and are even proud of the company is shocking to me. Sustainability can only be pushed forward with sustainable finances and the Tesla balance sheet is a horror show.

Tesla will file for bankruptcy protection in 2019.

>Tesla will file for bankruptcy protection in 2019.

We've been hearing this bankruptcy thing every year without fail since the company was founded 15 years ago. This doesn't mean the company won't go bankrupt but that they are more resilient than given credit for.

>And probably lots more that we don’t yet know about.

Those court cases you listed are daily life for big companies. Intel has been tied in a court case with the EU since 2001. Google just settled a court case. Google is also facing a bunch of other court cases. Tesla gets the spotlight but look around.

This doesn't mean the company won't go bankrupt but that they are more resilient than given credit for.

The Bloomberg Model 3 counter registered a sharp dip, so the risk is real, but my take is that it doesn't matter.

There is an unprecedented amount of decent EV models coming up for model year 2019. This goal has been achieved and I believe Tesla's stock always reflected the rate at which we were getting there, not the company's long-term viability.

The Bloomberg model 3 counter was using r/teslamotors as a source of VINs. When the ramp up was happening people were registering VINs all the time but now the sub has lost interest in VINs so the numbers are dropping.

It uses VINs registered by Tesla themselves now, weighted with a few other factors according to @tsrandall on Twitter.

Musk can no longer pump his own stock. He has been as good as handcuffed by the SEC settlement. I believe he can no longer raise.

The lack of insider sales and no raise over the past year, despite the precarious cash position, tells me something is preventing a new stock offering or not placing.

Large companies have teams of lawyers for a reason, that being that they are all involved in multiple simultaneous lawsuits. Tesla isn't special.

Doesn't matter if news is good or bad. People like you will flood the comments of all forums with visions of doom. Just a couple days ago everyone was sure the SEC case would sink Elon and look at where we are at now. This isn't a day trading forum. You don't have precognition.

Bankruptcy protection is not a guaranteed right. You are assessed for your request and then given protection.

I traded in an 8 year old POS and bought the model 3 yesterday. Elon and his team are headed in the right direction regardless of this drama.

If you took delivery yesterday, do mind if I ask what configuration and when it was you put down the $2,500?

Put $2,500 down at end of July and received my MSM Dual Motor yesterday.

Wow, I thought they were still working through the early deposits.

Deposits are global, deliveries are US and Canada only.

Good settlement for Musk and Tesla. They should have added a review of his tweets by the board or someone. I suspect he'll get in trouble again by sending something stupid.

Seems to me that Twitter has become a quick way to create or destroy your career.

One tweet, $40 mil...

The SEC press release reported that the settlement requires that Tesla put in place additional controls and procedures to oversee Musk’s communications. That seems likely to include controls over his Tweets.

Good point, that's going to help him and Tesla a lot. All his tweeting was distracting from the good things they are doing.

Irony is he will probably burn more shorts with this announcement than he did with the initial set of tweets... and the SEC helped him do it this time around!

Related question regarding burning the shorts. The SEC said the $40 million in fines would go to aggrieved investors in a court approved process. But the people who were hurt the most by Musk's initial tweet were short sellers with stop loss orders. But I don't think they would classify as "investors", considering they profit when TSLA goes down.

Does anyone know how this process works, or do you think short sellers would have a claim to some of that $40 million?

I don't think so.

The biggest burns are the people who bought in at $370 thinking that Elon Musk would be selling the company at $420.

Shorts may have gotten margin called, but the stock was skyrocketing on the news. Everyone who bought stocks during the tweet in question is basically able to sue for damages.

I seriously wonder if Musk thought this up to catch people short over the weekend, by leaking that he didn't want to settle on Friday and then settling over the weekend.

As long as he got his "friends and family board" he probably will do what he has been doing. I doubt 2 new directors will be able to control him.

If it was his plan to tank the stock 14% on Friday, thinking it would pop back up and beyond Monday to hurt the shorts he’s been smoking far too much.

After hours trading is only up .5% from close, Friday morning it was already down like 12% when the market opened.

> After hours trading is only up .5% from close

That number was calculated as of 8PM Friday. It doesn't include the impact of this news.

Thank you, don’t know how I spaced that.

You're forgetting about the upcoming Q3 report that is about to be published.

What does stepping down as chairman but not CEO entail practically?

He’s lost control of the board.

Which means they have the ability to remove him as CEO.

It seems irrelevant but it's actually really significant. The board of directors is back in charge. Though shareholders currently massively back Elon, there is no guarantee it will always be that way.

It means he can be fired.

That was quick. Probably for the best, given the obvious trouble overwork has been causing him.

Interesting to note specifically the point about controls on his Twitter account that could’ve prevented this.

The problems with Musk are far more than just his overwork. There’s a lot to work on.

There’s been persistent rumours of serious drug use. His outbursts are erratic and unhinged ie. calling a diver a paedophile on multiple occasions. His private life is extraordinary for a CEO to say the least. He clearly lacks self control ie Twitter and Joe Rogen show. And his I’m the victim attitude towards short sellers, media etc is pretty unparalleled.

I suspect that losing the Chairman position is the last step before being removed as CEO.

All of this is from last 6-12 months. Let's not forget what public opinion was without the news cycle telling us what to think.

I am not saying his public statements were bad. Just trying to put some perspective. Also, smoking marijuana is ok and legal. He took a puff and all of a sudden he is a drug addict. WTF!?

Just watch his interview Salman Khan (Khan academy) or look up his accomplishments.

> Also, smoking marijuana is ok and legal.

It is illegal on a federal level. And as someone who runs a company with multi-billion-dollar National Defense contracts, which are almost certainly contingent on him holding a security clearance, it shows an incredible lack of judgement to consume marijuana publicly.

> It is legal on a federal level.

You mean to say illegal.

Yes, thank you. Updated.

the rumors about Musk having a drug problem predated his appearance on Rogan - the first I heard of the rumors was from Azealia Banks's (questionably reliable source) rant about her weekend with Grimes at Elon's house.

Because he smoked pot on a podcast? Come on buddy it's not 1950 anymore, everyone knows marijuana (except when used in excess regularly) is totally and completely harmless.

Is this satire? You don’t go on a podcast as the CEO of a national, government contracted company and do a federally illegal drug.

Conversely, two (federal) Presidents have admitted to using it, one of them definitely unlawfully:



Lets be honest these 'persistent' rumors are persistent because the media loves this story and everybody loves to repeat these things and make a big narrative out of it. The NewYork Times made him out to be totally unhinged in a article that was flat out disingenuous.

All this 'he is a drug addict' stuff came from like 2 people saying he used sleeping pills sometimes.

I give it 70% chance that it's a significant enough wake up call that he gets his act together.

Perhaps this will result in some 'adult supervision' at Tesla.

I'm skeptical however.

Imagine being the Tesla board or his lawyer. Just yesterday he made a stand that he would never settle and here we are.

I’m assuming over the past 24-48 hours it’s been a full court press of everyone trying to talk some sense into Elon. Glad they succeeded!

I follow this stuff pretty closely and I haven't seen any mention of him making a stand and saying he'd never settle. All I've seen is an article referring to "sources" that said he or his team rejected a specific settlement. Can you point me to your source for the claim that he'd never settle?

Musk reportedly refused to sign the deal at the last minute because he felt he would not be truthful to himself and wouldn't have been able to live with the idea he'd agreed to accept a settlement and any associated blemish.


Ok, so this is an article referring to some other reporting, which was somehow sourced itself. Suffice to say that factoid should come with significant uncertainty attached.

So Musk is stepping down as chairman of the board at Tesla, but one thing this doesn't really address is whether he'll remain as CEO. I presume that decision will be made by the new (larger) board of directors?

He will stay on as CEO.

you never know, the expanded board might actually be suicidal and choose to kill the goose that lays the golden eggs. I don't think they're that deranged, but you never know.

Tesla doesn’t need Musk right now.

They need a serious executive from a former car company who has experience in quiet, deliberate execution. Lots of companies are making cars without anywhere near the same levels of fanfare.

"They need a serious executive from a former car company who has experience in quiet, deliberate execution."

Not really.

They need that as a COO.

Tesla has no real magic sauce. They are what they are because of the Musk Hype Machine and his ability to 'inspire' people to move to electric.

If Tesla was based on some magic ingredients that were a real competitive advantage, I'd say let a 'quiet' CEO take over with a hot dog CMO.

But they are still in 'founders mode' wherein the founder is a big factor in inspiring and motivating and that gives him a lot of power.

You might be surprised to know that regular CEO's don't necessarily have all the power you think. They have to convince, fight internal battles, motivate. It's hard for them to do 'big things'.

Musk is becoming a problem but not so much that he needs to go.

He needs a really powerful COO who can go toe-to-toe with him - and he needs to get some f*ing sleep and go back to the 'old' Musk from 2010.

I disagree. Musk is the face of the company and the brand. Consumers will be less interested if he's ousted against his will and no longer involved. Tesla might not die, but I don't think they'd be as successful without him.

Pretty sure consumers would be happier about having a car that is available to buy and doesn’t have major quality issues.

I disagree. Musk as CEO drove Tesla, against every estimate I've seen or heard of, to be profitable. Prior to musk, the cars didn't exist... So they were unavailable to buy. And I don't see how changing him out will fix quality issues, other than having a future CEO halt innovation in favor of bug hunting... Which would be the start of a quick end for Tesla. They are built on innovation.

Musk is a great startup CEO. But what Tesla needs now is an enterprise CEO.

And you can be an enterprise CEO and still innovate as a company eg. Apple, Microsoft, Mercedes-Benz.

> Musk is a great startup CEO. But what Tesla needs now is an enterprise CEO.

I guess that’s the new meme about Musk now, but I see no reason to believe it. Plenty of startup CEOs have done well after their companies became enterprises. Larry Ellison and Bill Gates and Jeff Bezos are obvious examples. So is Steve Jobs, who came back to Apple after a decade of absence and rebuilt the company.

Some have, but what are the numbers on that? Do more handle the switch ok (not even great, but in the "The company isn't going to tank" sense), or do more have problems and need to be replaced, if only for a while?

Someone like Rick Wagoner? (CEO of GM 2000-2009)

I get what you're saying, but choosing from "business as usual" automotive industry leaders has a spotty track record.

Particularly where innovation is concerned.

Many traditional automaker executives are playing catch-up with Tesla with regards to electrification of transport. They're moving second, copying Elon Musk. There is some truth to the idea that Tesla can benefit from the experience of legacy automakers. It is why they have hired people who have such experience. Replacing the founder that the other executives are still in the process of copying though? Kind of crazy.

Especially since Tesla is not just a car company. They are making headway into utility scale energy markets, planning to get into roofing, and have a relationship which will likely help them in the disrupting-the-use-of-roads-as-primary-means-of-transport-by-the-elimination-of-traffic industry that Elon Musk is trying to get set up. It's very safe to say that the status-quo certified executives could still need to continue playing a game of following-the-leader.

While Elon Musk is saying that the only thing that matters is pace of innovation, legacy automaker executives are advocated for on the basis of their relationship with status quo. Tesla doesn't exist in a world with status quo. In a world with status quo, regulators force the automakers to acknowledge the impact of their work on climate change and they grudgingly change course. This has been happening over time. We've seen them faking emission test results. We've seen them producing compliance vehicles so that they have access to markets that are trying to convince them to actually do the right thing.

So yeah, I'm in total agreement with you.

The reason most people know about musk is because of Tesla not the other way around.

Which is to say that if Tesla hadn’t produced great cars nobody would give a shit about what the guy that started PayPal had to say. He’s famous because Tesla delivered, his so called celebrity status didn’t make the cars popular.

and Tesla delivered great cars because he played an important role in making that happen?

Or did he jump in as CEO after Tesla became popular?

At the very least he is a one person marketing machine making people buy pricy cars by a very new car brand using only his twitter account and his personal brand (and shooting one car at mars). Quick googling got me a VW ad budget of more than $6 billion. $40 million is nothing compared to that.

My humble opinion is that Tesla without Musk is worth a small fraction of its current valuation. It's a tiny car manufacturer in a world of hyper-competitive giants, and the only thing that kept it afloat is Musk's incredible drive.

Exactly like Apple didn't need Steve Jobs. Except they did.

I disagree. Musk is to Tesla what Jobs was to Apple. Not in the same way ofc. but in the same sense. If Tesla lost Musk now it would likely be damaging to the company in similar ways as it was to Apple in the years after Jobs departure in 1985.

There is nothing a traditional car company CEO would bring to the table that Tesla would need. All initiatives that Tesla is aiming for needs a visionary workaholic like Elon. Tesla needs Elon. He is irreplaceable.

> Lots of companies are making cars without anywhere near the same levels of fanfare.

Could that be because almost all of those other cars are utterly unremarkable?

Do you think Tesla could have made it through production hell without Musk? Nobody knows the technical details of Tesla the way Musk does. Nobody would sleep in the factory like Musk does. Who else would have shipped a production line from Europe by air? The dude solves problems and puts out fires and keeps Tesla on the right path like nobody else. People like Elon Musk are not fungible.

The general consensus is that Tesla experienced production hell solely because of Musk. Moreover, their impending cash crunch is also due to Musk rushing through things rather than stepping back for a minute to spend quality time figuring out the details.

People like Musk aren't just replaceable, they should be replaced so soon as possible to lookout the damage they do.

Now that's an entertaining thought. Why not just set fire to all the company's assets right now and be done with it? 'Serious executives' are who you bring in when things are running smoothly and there's not much to screw up. Someone like Elon is needed to get it to a more stable point both product and revenue-wise.

Lots of companies are making cars without anywhere near the same levels of fanfare.

I don't know much about the auto industry, and don't really follow Tesla, but I do know that Tesla stock is worth almost an order of magnitude more than General Motors.

Only by share price, which doesn't matter. By market cap, a far better (though still imperfect) measure of company value, GM is worth a little more.

TSLA ~$45.5B

GM ~$47B

The stocks aren't really comparable. If you liquidated the companies GM would bring in many times Tesla. Tesla's value comes with a huge risk premium. Tesla was very close to going under a few months ago and it could still do so, if it doesn't execute right.

Do you really believe he couldn't raise 4-5 billion by calling friends at Google who share his vision? He wouldn't want to dilute his holdings, but if push came to shove he'd do it.

I think that's a little overblown. Certainly Musk has his talents but they are not infinite and as we've seen he also brings a lot of disadvantages to the table as well. Not just these outbursts but many other aspects of his management and working style (not just at Tesla but also at SpaceX and going back to PayPal) are incredibly problematic from the perspective of attempting to run a well functioning company.

SpaceX succeeds mightily partly because there are many other forces there to counteract Musk's problems, which doesn't seem to be the case with Tesla. It's also worth noting that Tesla is on a lot shakier ground than many of its fans believe. Tesla's done a great deal to advance the technology of electric cars but the rest of the industry is catching up and Tesla has made some major mis-steps of late (such as with model 3 production). Yes, Tesla would be ill-served by replacing Musk with a typical empty-suit executive, but with a competent and pragmatic leader it would probably be just fine.

This seems like a definite plus for all involved.

The Board and Chair set the overall strategy, while the CEO executes. In the next few years, the strategy is already clear -- execute on the Model 3, Model S & Roadster upgrades, Tucks, and solar products. The board should just be a background process for a while, while the pressure is on the CEO. By the time he gets his 'Chairman License' back, it may be time to update strategy.

Meanwhile, the SEC notches a "win", the investors can go back to their regularly scheduled short-long bickering, and Elon can focus more on delivering.

Can he remain on the board as a regular board member? It only says he's stepping down as (and forbidden for three years from being) chair.

I would assume yes, but he wouldn't be eligible for either of the two new independent board seats and can't keep the chairman's seat, so for him to remain on the board would require one of the existing board members to give up their seat to him.

Not if an existing board member becomes chairman.

Anyone know the difference between the proposed settlement he turned down and the one he accepted? I'm very curious!


The plan, as it was negotiated by lawyers, was for Mr. Musk to step down as chairman of Tesla within 45 days and not resume that post for two years. The company, also a party to the proposed agreement, would add two new directors to its board. Mr. Musk and the company would pay tens of millions of dollars in fines, according to the people, who requested anonymity because they were not authorized to speak publicly.

For one the original proposed settlement apparently had a 2 year ban (don't know if it only applied to the chairman title or CEO as well), and him stepping down was meant to happen within a 60 day period.

Per multiple reports, the fine was doubled.

> Musk and Tesla will each pay a separate $20 million penalty. The $40 million in penalties will be distributed to harmed investors under a court-approved process.

Well, the stock has done somersaults in all directions since then (benefiting both longs and shorts.) I wonder who would be eligible for part of this payout.

Who will be eligable?

I suspect the investors with the best-connected lawyers will get payouts, which they will then share with the aforementioned best-connected lawers.

yeah, The SEC charge probably harmed as many investors

There are some crimes that are so blatant, public and obvious that the regulators _have_ to punish you, as any other option would make it look like the regulators were so ineffectual and weak there were effectively no rules.

Filing public charges requesting his removal as CEO even though they weren't seeking that in the settlement seems like a calculated move to maximize the impact to the share price and thereby force a quick settlement. It was evidently effective, but it was a hell of an expensive way to win if you're measuring winning in terms of protecting investors. Anyone who got stop loss'd out of their shares has a right to be displeased.

The SEC doesn't protect inverstors by protecting share prices. They protect them by removing bad actors from the market.

If CEOs are allowed to release false information, it won't be long before every other company behaves like Enron, and investors desert stock markets.

  it was a hell of an expensive way to win
  if you're measuring winning in terms of
  protecting investors.
Not at all. The SEC is thinking not in terms of this one crime, but in terms of the hundred CEOs who will feel tempted to commit securities fraud in the future, and the hundreds of thousands of investors who will fear such fraud.

Will they think "Remember Elon Musk, he got his ass kicked at high cost to himself and his investors, nobody does it" or will they think "Remember Elon Musk, he did this and got away scot free, everyone does it" ?

That's the choice facing the SEC, and for obvious reasons they chose the former.

> Not at all. The SEC is thinking not in terms of this one crime, but in terms of the hundred CEOs who will feel tempted to commit securities fraud in the future, and the hundreds of thousands of investors who will fear such fraud.

The deterrence argument can be used to justify anything. Why don't we behead the entire families of petty thieves? Think of the millions of other thieves who would be deterred.

It's a false dichotomy. The choices aren't "scott free" or "nuclear option" -- if their case was as strong as is being assumed, all they would have had to do is ask for what they got in the settlement and then get that in the proceeding. It wouldn't even remove the incentive to settle since that would still allow them to avoid a determination of guilt.

They could also have just given the settlement negotiations more time before making a public charge to begin with. Give the other side's lawyers a chance to explain things to their client for a while first.

Very ironic that the SEC action itself hurt longs significantly worse than the offending tweet.

Presumably this is short term pain for long term increased stability/control over investor communication.

Moreso is Tesla [investors] paying the price for the SEC to make an example of them for all other public companies.

So SpaceX isn't going public any time soon.

Musk has said publicly that he doesn't want SpaceX to be public because short term market interests and pressures will likely override his goal of getting to Mars. In truth he doesn't want Tesla to be public either, but it was the only way to get the needed capital.

This is a pretty mild punishment compared to the sorts of things the SEC has the power to do, like getting Musk banned for life from any executive position in any company, forcing him to get rid of all his ownership in Tesla, and fining him many billions of dollars.

That the SEC settled so quickly and for so little makes me think they believed they couldn't get any more to stand up in court. I assume that Musk refused a more harsh earlier settlement because he was aware of this. So he played chicken with the SEC, and the SEC backed down.

It would be really good, though, if Musk learned a lesson from all this and decided to be more responsible in his communications.

That's a weird narrative you are saying. SEC settled quickly and little because this is not a "bad" security fraud. There's little reason to punish him harshly since he probably doesn't have malicious intent. The punishment has to fit the crime after all. No reason for the SEC to destroy a person and company over a tweet. They have to have some punishments though because the fraud was too obvious.

The Thursday's failed settlement was slightly better that this one too. SEC's case is likely to hold up in court because Musk's recklessness was too obvious but the court's punishment would probably be similar to the settlement.

You are just saying what I said but in different words.

SEC played chicken with Musk and Musk backed down.

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