[ad_1]
Four Elon Musk tweets. Trial One Securities and Exchange Commission. Two settlement offers. Then some extra tweets on Musk taunting the SEC.
As Tesla continues to prove that its doubters are not right as a car and energy company, the game of social media is hanging over his finances. The title climbed to $ 310.70 a share on Monday, after Musk agreed to settle with the SEC last weekend. But the company ended this Friday around where it was a week earlier, at $ 261.95 per share, apparently motivated by investors' fears about the CEO's persistent problem with Twitter.
The SEC needs to help creative but impulsive entrepreneurs such as Musk get out of social media and focus on building their business – being fair but firm.
So far, it has been too easy and it has created a false precedent. When companies become public, they agree to put the interests of their shareholders first. An impulsive tweeting breaks this case.
Once Musk rejected the first settlement, the SEC could have started its trial and set the example. Musk's tweets were the kind of flagrant behavior that would have been an easy victory in court. The SEC would not have needed to prove that Musk intended to defraud. It would have been sufficient to prove that it was more likely than unlikely that Musk disclosed a false or misleading fact without context – which is not a very high bar if we consider the very fragile foundation of his tweets.
How did we get there?
It all started with one tweet. August 7th Elon Musk tweeted To its 22 million followers on Twitter: "I'm considering taking Tesla privately at $ 420. Financing assured. The frenzy that followed was amplified by three more tweets on Musk.
Together, these four tweets were the basis of the lawsuit filed by the SEC against Musk in the Southern District of New York on September 27. In its lawsuit, the SEC asked the court to dismiss Musk as both president and CEO of Tesla, Musk must pay unquantified civil fines and ban Musk from directing all listed company for an indefinite period.
According to the SEC, Musk's tweets were based on a half-hour meeting on July 31 between the representative and the representative of the Saudi sovereign wealth fund. At this meeting, the fund announced to Musk that he had bought almost 5% of Tesla's stock in the free market, and expressed interest in taking Tesla privately. But Musk did not receive an official offer, so he did not receive full legal advice on what to do to become private, and he had not even spoken to the fund before his August 7 tweets. .
Oh, and the price of $ 420? the SEC complaint Musk claims to have added 20% during the action at the close of the eve of his tweet, got $ 419 and rounded up to $ 420 because he thought his girlfriend would find him funny given 420 meaning.
Immediately after the filing of the SEC's complaint, an agreement between Musk and the SEC would have allowed him to pay a $ 10 million fine, stay as CEO and force him to step down as president. only two years. Given what the SEC was pursuing, these terms can only be qualified as generous. But Tesla's council has always rejected the settlement, would have because Musk threatened to stop when he agreed.
The day after the rejection of the transaction, Tesla's lawyers were back in front of the SEC. Musk reluctantly agreed to establish himself as a stock of the company. nearly 14% of draws on news without regulation.
Under regulation 2.0, the ban on Musk from presiding went from two to three years and the fine imposed on Musk doubled to $ 20 million. Tesla has also agreed to pay a fine of $ 20 million, to add two independent directors to its board of directors and to elect an independent director to the presidency to replace Musk. As part of the transactionTesla must also put in place procedures and controls to oversee Musk's communications, including its use of social media.
Just hours after the judge who presided over the case asked Musk and the SEC to demonstrate that the settlement was in the "public interest", Musk Twitter again to taunt the counterpart he needs to get help from the court with the settlement: "I just want [sic] that the Short Selling Enrichment Commission is doing an incredible job. And the change of name is so obvious! By the way, Tesla Stock price fell after the last tweet from Musk.
The SEC can still put an end to the agreement, but -if the story is a prologue- this seems highly unlikely.
What's wrong with Musk's tweets?
The main question is whether Musk's tweets were fake or at least misleading. Under the SEC rulesyou can not make a false statement or give enough context to make a statement to make sure it is not misleading. You can easily see how Musk's tweets can be regarded as false or without false warnings about the preliminary nature of the discussions, at least misleading.
Saying "financing obtained" means that Tesla actually had more than $ 70 billion to keep the company private. No such funding has actually been obtained. No agreement was discussed and even less agreed with the Saudis. Even though Musk had funds, the approval was far from certain. Any privatization transaction would have required the approval of the board of directors. The Saudis had told Musk that their investment could be contingent on Tesla building a factory in the Middle East, a condition described by at least one member of Tesla's board of directors:non-starter. "
It's not difficult to imagine what led to Musk's tweets. He was candid about being embarrassed by the myriad of requirements related to the stock market listing. He called the questions of an analyst "dumbass"And" dry "at the winning Tesla call.For years, he expressed his frustration with the short sellers.Musk must really be excited about the idea that the Saudis take Tesla in camera for do not have to worry about it anymore.
It is true that disclosure requirements are cumbersome. It takes countless hours of expensive lawyers to file a single case with the SEC, and then have to file another case in the next quarter or the next hardware development. The SEC itself moves slowly. It was not until 2013 that accept tweets as a form of disclosure. It took until 2014 to agree that a hyperlink in a tweet is sufficient for the language of the disclaimer, as opposed to the need to use the language of the full disclaimer in the limited characters allowed in a tweet.
But the rules of the SEC exist for a reason. They are intended to level the information gap between companies and their shareholders and to protect millions of public company investors. Musk may have been well-intentioned in his tweets, but that does not put him above the law and does not allow him to make Tesla's course of action a roller-coaster ride. He can complain about anything he wants about SEC rules, but these rules were a requirement for public companies long before Tesla was made public. By choosing public roads for cash, Musk and Tesla have knowingly agreed to these compromises.
Missed opportunity to set a clear precedent
In the end, what counts most for any action taken by the SEC, is the precedent it creates.
The SEC has had a unique opportunity here to model Musk's blatant behavior. Instead, the statement by SEC Chairman Jay Clayton about the settlement gave the impression that the SEC was making an exception for Musk because he was at the center of Tesla. Clayton said Penalties for violations of securities laws must be balanced by "the skills and support of certain people" that are important "for the future success of a company".
In other words, it seems, the more important you are, the more you behave imprudently.
Musk is in the center of Tesla, but that does not mean he has to be the first to wear all the hats in the company. There is a reason why Tesla has legal, policy and communication departments that go through series of approval before disclosing their company information. It's not much to have asked Musk to call a lawyer from these departments before tweeting.
Rather than establishing this dual criterion based on the centrality of an officer over a corporation, the SEC could have sued Musk in court and allow the court to establish a standard that applies equally to all directors. By taking this route, Musk would also have had the opportunity to appear in court to explain to an impartial adjudicator why the SEC's actions to prosecute him were "unjustified. "
Even if the SEC did not want this case to drag on, leaving the Tesla investor in suspense in the meantime, it would at least have taken longer to accept the second settlement. The specter of a continuation of the proceedings would have had a greater deterrent effect than the two days that were required to move from trial to settlement. According to Musk's tweets mocking the SEC after the deal, it would be hard to argue that he learned his lesson.
Instead, Musk's cult of being the absolute model for all questions, large or small, at Tesla will continue. In the end, it devalues other members of society and gives them a false sense of security based on the sacred words of a person. According to the SECOn August 7, Martin Viecha, Tesla's Investor Relations Manager, sent an e-mail following Musk's tweets requesting clarification of funding. Viecha responded within ten minutes with: "I can only say that the first Tweet clearly stated that" funding is secure ". Yes, there is a firm offer.
Viecha could not know that the funding was more secure than Musk. He did not really know whether there was a firm offer or not. But Tesla's corporate culture clearly did not allow him to guess what Musk was saying, to the ultimate detriment of the company and its investors.
Musk may be in the news these days, but other CEOs of public companies also have social media accounts. What they say – or do not say – can also hurt investors and their own businesses. If Musk can get away without complying too much with the rules, what will prevent others from trying? The SEC's indirect recognition that Musk's terms of settlement are justified by Musk's centrality to Tesla is exactly the kind of precedent that other Silicon Valley leaders might retain to justify inappropriate behavior on the part of Musk. social networks.
As paradoxical as it may seem in a world where the most powerful seem to be chirping with impunity, we should at least hold public company directors fully accountable for their actions in violation of securities law. Tweets and social media posts have real consequences. Tesla shareholders deserve the brilliant technologist on whom they bet their money, not a social media troll.
The treatment of Musk tweets by the SEC has so far been a missed opportunity to make it understood.
[ad_2]
Source link
