A big fine, a new president and a huge opportunity for Tesla

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Internet buzzed about the recent agreement between Tesla chief executive, Elon Musk, and the Securities and Exchange Commission, about charges of stock manipulation resulting from a tweet of August 7.

Among the sanctions, Musk and the company must each pay a fine of $ 20 million. He will have to leave his position as chairman of Tesla's board. This is not nothing. In the end, however, the settlement may actually present opportunities for the company as it enters a difficult period of expansion.

Musk has always been the visionary of the company in design and engineering. How will his change of role affect the future product line of the electric car manufacturer? "This will probably not be the case," said Mike Ramsey, research director at CIO research group Gartner, an industry analyst.

A new painting, however, could allow Tesla to end one of Musk's soaring, semi-"total misadventure and misuse of capital," according to Ramsey's terms.

This would free up resources for Tesla to increase production of its next generation SUV, the reduced Y model, which will require massive immediate capital investment – money that Tesla does not seem to have – in the spring.

"The Y is essential for the company," says Ramsey. "Not only does the vehicle fall into the hottest segment of vehicles in the automotive industry – the low-end SUV / CUV – but it is a cheaper alternative to the expensive X model, like the model. 3 to S. »

Although the Y model seems to have the biggest potential of the mass market, another option would be to invest more resources in the new Roadster, which has a place of choice.

"It's a guaranteed winner," says Willy Shih, a Forbes contributor and management professor in the Technology and Operations Management Unit at Harvard Business School. "This will give the company the same momentum and media attention that it had when it released the Model S and Model 3. Many wealthy and environmentally conscious people are willing to pay a premium for a Tesla supercar. . It will be sold before the first vehicle leaves the assembly line. "

In addition, the capital investment on the Roadster could be easier to swallow for Tesla because the sports car, unlike the Model Y, will be produced in small quantities.

Although all product movement is speculation, one thing is certain: the decision will have an impact on product promotion and how Musk communicates with the masses.

"Announcing your intention to market certain products via Twitter could be a thing of the past," says Ramsey, of Gartner. "His tweets will have to be checked more carefully – approved by the lawyers, most likely – in advance. The free flow of information will end, which probably will not please its followers. "

Despite this, the settlement is "almost like a drug for Tesla," says Ramsey. "In a way, the government is doing something that the company could not do," Elon said. His actions pose a threat to society and the board is weak, unable to repress it. The SEC has made society more viable, essentially, by introducing controls – bring in some adult supervision. "

This latest controversy began in August when Musk shocked Wall Street and its subscribers on Twitter, whose number now stands at 22.9 million, announcing that he was taking Tesla behind closed doors (he did not). was not) and that he had obtained the necessary funds to do so. & # 39; t). The company's share price has skyrocketed, annoying many short sellers. The SEC was not amused and took legal action on September 27th.

Musk was arranged in an unusual way, agreeing to pay a $ 20 million fine and to step down from the Tesla presidency. He can not be re-elected to this position for three years, but he will remain as CEO. In addition, Tesla has been ordered to pay an additional fine of $ 20 million and must appoint two new independent members to the board of the company.

It remains to be seen whether the Ministry of Justice will appeal to Musk. According to a report prepared by Colin Langan, an analyst at UBS, the Justice Department is investigating Musk, his case being based on "evidence that Musk's tweet was intended to manipulate the course of action" and to " burn the sellers in the open. penalty – perhaps a prison sentence, which could be devastating for the future of Tesla.

Musk has already faced manufacturing, liquidity and a poorly profitable flagship during his tenure, but even then, investors would have often wanted him to act differently. For example, after having slept in the factory while trying to reach an unrealistic production target of Model 3, Tesla has actually achieved its goal. But for some, the captivity Musk imposed himself gave him less the appearance of a dedicated leader doing everything in his power to keep his promises, rather than somebody else. One who managed each decision.

"Musk might think he's Steve Jobs, but he's not," says Harvard's Shih. "Jobs was also a control freak. But that's not how a chairman of the board or a CEO builds a strong team, and Jobs knew it. He hired some very competent people who were waiting for them to do the job. Some people know how to solve Tesla's manufacturing, quality control and production problems. How about exploiting them? How about leveraging their skills? Why not try to do everything yourself? It seems that Elon never thought of that.

Musk's erratic behavior – apparently smoking marijuana during an interview on The Joe Rogan experiencefor example, has also raised concerns among investors about its ability to lead the company. A more independent board could provide the oversight that many legal experts and Tesla investors believe is necessary and, frankly, long overdue.

The problem is that Musk's vision and his daring staging helped Tesla's valuation to overshadow the numbers of the traditional and established American automakers, with billions of revenues. He has also won millions of hard-hearted fans willing to support him, no matter what he says or does. Who else could get a bridging loan of half a billion dollars from potential customers?

Tesla will probably have to raise capital in 2019 to reach its expansion goals. Technically, the company could raise funds whether Musk is part of the process or not. however, it could be more difficult without him.

"Historically, Tesla had easy access to financial markets, largely thanks to public perception that Musk was a visionary," says Langan of UBS. "Without Musk, investors may no longer be willing to continue funding a company that has never declared annual profit." No money, no product.

Part of the challenge for the board of directors will be to maintain Musk's commitment while building stronger directors, not just men and women.

"If the panel" & lsqb; & rsqb; The constitution changes significantly – they add two more administrators and ask Musk's brother to leave his post – they will then have a foolish chance to enact a significant change, "Shih said, otherwise nothing can change.

In addition, if the new president really wants to control Musk, he will have to hire a chief operating officer or a chair who reports to the board and can not be fired by Musk.

"The contrast between Tesla and SpaceX should be instructive for Musk," says Shih, referring to one of Musk's other companies. "SpaceX has a great COO at Gwynne Shotwell. She keeps things in balance. That's what Tesla needs.

Tesla has until November 13 to appoint a new president. At this point, the most important candidate to replace Musk in this position appears to be James Murdoch, managing director of 21st Century Fox and son of Rupert Murdoch, according to reports from the Financial Times and other media outlets. (Musk responded with a tweet According to FT's report, Murdoch is already an independent director of Tesla and has indicated that he wants the job. However, Murdoch has no experience in manufacturing and has never run a car or electric vehicle manufacturing company.

Ramsey sees this as a problem, saying, "They have to bring in people involved in manufacturing, an intimate person with automobiles."

Alan Mullaly, former President and CEO of Ford Motor Company, would he do the business? "That would be great, excuse my French," says Ramsey.

Even so, most industry insiders and Wall Street analysts are skeptical about the fact that no matter who can bring a significant change, with the charismatic but impulsive musk that offers perhaps a fierce resistance.

"Say it happened to Henry Ford," says Ramsey. "Henry was no longer allowed to preside over the company he had built with his own hands. However, he was still part of the board of directors. What influence do you think Henry Ford would have on the company as a director and CEO compared to its president? Absolute. Same thing with Musk. "

Shih says, "Musk has too much of himself in the business right now. He probably does not want to give up that control. And since he does not tolerate dissent very well, he will probably try to destroy anyone who arrives with an agenda other than his own. "

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Internet buzzed about the recent agreement between Tesla chief executive, Elon Musk, and the Securities and Exchange Commission, about charges of stock manipulation resulting from a tweet of August 7.

Among the sanctions, Musk and the company must each pay a fine of $ 20 million. He will have to leave his position as chairman of Tesla's board. This is not nothing. In the end, however, the settlement may actually present opportunities for the company as it enters a difficult period of expansion.

Musk has always been the visionary of the company in design and engineering. How will his change of role affect the future product line of the electric car manufacturer? "This will probably not be the case," said Mike Ramsey, research director at CIO research group Gartner, an industry analyst.

A new painting, however, could allow Tesla to end one of Musk's soaring, semi-"total misadventure and misuse of capital," according to Ramsey's terms.

This would free up resources for Tesla to increase production of its next generation SUV, the reduced Y model, which will require massive immediate capital investment – money that Tesla does not seem to have – in the spring.

"The Y is essential for the company," says Ramsey. "Not only does the vehicle fall into the hottest segment of vehicles in the automotive industry – the low-end SUV / CUV – but it is a cheaper alternative to the expensive X model, like the model. 3 to S. »

Although the Y model seems to have the biggest potential of the mass market, another option would be to invest more resources in the new Roadster, which has a place of choice.

"It's a guaranteed winner," says Willy Shih, a Forbes contributor and management professor in the Technology and Operations Management Unit at Harvard Business School. "This will give the company the same momentum and media attention that it had when it released the Model S and Model 3. Many wealthy and environmentally conscious people are willing to pay a premium for a Tesla supercar. . It will be sold before the first vehicle leaves the assembly line. "

In addition, the capital investment on the Roadster could be easier to swallow for Tesla because the sports car, unlike the Model Y, will be produced in small quantities.

Although all product movement is speculation, one thing is certain: the decision will have an impact on product promotion and how Musk communicates with the masses.

"Announcing your intention to market certain products via Twitter could be a thing of the past," says Ramsey, of Gartner. "His tweets will have to be checked more carefully – approved by the lawyers, most likely – in advance. The free flow of information will end, which probably will not please its followers. "

Despite this, the settlement is "almost like a drug for Tesla," says Ramsey. "In a way, the government is doing something that the company could not do," Elon said. His actions pose a threat to society and the board is weak, unable to repress it. The SEC has made society more viable, essentially, by introducing controls – bring in some adult supervision. "

This latest controversy began in August when Musk shocked Wall Street and its subscribers on Twitter, whose number now stands at 22.9 million, announcing that he was taking Tesla behind closed doors (he did not). was not) and that he had obtained the necessary funds to do so. & # 39; t). The company's share price has skyrocketed, annoying many short sellers. The SEC was not amused and took legal action on September 27th.

Musk was arranged in an unusual way, agreeing to pay a $ 20 million fine and to step down from the Tesla presidency. He can not be re-elected to this position for three years, but he will remain as CEO. In addition, Tesla has been ordered to pay an additional fine of $ 20 million and must appoint two new independent members to the board of the company.

It remains to be seen whether the Ministry of Justice will appeal to Musk. According to a report prepared by Colin Langan, an analyst at UBS, the Justice Department is investigating Musk, his case being based on "evidence that Musk's tweet was intended to manipulate the course of action" and to " burn the sellers in the open. penalty – perhaps a prison sentence, which could be devastating for the future of Tesla.

Musk has already faced manufacturing, liquidity and a poorly profitable flagship during his tenure, but even then, investors would have often wanted him to act differently. For example, after having slept in the factory while trying to reach an unrealistic production target of Model 3, Tesla has actually achieved its goal. But for some, the captivity Musk imposed himself gave him less the appearance of a dedicated leader doing everything in his power to keep his promises, rather than somebody else. One who managed each decision.

"Musk might think he's Steve Jobs, but he's not," says Harvard's Shih. "Jobs was also a control freak. But that's not how a chairman of the board or a CEO builds a strong team, and Jobs knew it. He hired some very competent people who were waiting for them to do the job. Some people know how to solve Tesla's manufacturing, quality control and production problems. How about exploiting them? How about leveraging their skills? Why not try to do everything yourself? It seems that Elon never thought of that.

Musk's erratic behavior – apparently smoking marijuana during an interview on The Joe Rogan experiencefor example, has also raised concerns among investors about its ability to lead the company. A more independent board could provide the oversight that many legal experts and Tesla investors believe is necessary and, frankly, long overdue.

The problem is that Musk's vision and his daring staging helped Tesla's valuation to overshadow the numbers of the traditional and established American automakers, with billions of revenues. He has also won millions of hard-hearted fans willing to support him, no matter what he says or does. Who else could get a bridging loan of half a billion dollars from potential customers?

Tesla will probably have to raise capital in 2019 to reach its expansion goals. Technically, the company could raise funds whether Musk is part of the process or not. however, it could be more difficult without him.

"Historically, Tesla had easy access to financial markets, largely thanks to public perception that Musk was a visionary," says Langan of UBS. "Without Musk, investors may no longer be willing to continue funding a company that has never declared annual profit." No money, no product.

Part of the challenge for the board of directors will be to maintain Musk's commitment while building stronger directors, not just men and women.

"If the [board] The constitution changes significantly – they add two more administrators and ask Musk's brother to leave his post – they will then have a foolish chance to enact a significant change, "Shih said, otherwise nothing can change.

In addition, if the new president really wants to control Musk, he will have to hire a chief operating officer or a chair who reports to the board and can not be fired by Musk.

"The contrast between Tesla and SpaceX should be instructive for Musk," says Shih, referring to one of Musk's other companies. "SpaceX has a great COO at Gwynne Shotwell. She keeps things in balance. That's what Tesla needs.

Tesla has until November 13 to appoint a new president. At this point, the most important candidate to replace Musk in this position appears to be James Murdoch, managing director of 21st Century Fox and son of Rupert Murdoch, according to reports from the Financial Times and other media outlets. (Musk responded with a tweet According to FT's report, Murdoch is already an independent director of Tesla and has indicated that he wants the job. However, Murdoch has no experience in manufacturing and has never run a car or electric vehicle manufacturing company.

Ramsey sees this as a problem, saying, "They have to bring in people involved in manufacturing, an intimate person with automobiles."

Alan Mullaly, former President and CEO of Ford Motor Company, would he do the business? "That would be great, excuse my French," says Ramsey.

Even so, most industry insiders and Wall Street analysts are skeptical about the fact that no matter who will come to bring a significant change, with the Charismatic and yet impulsive Musk which offers perhaps a fierce resistance.

"Say it happened to Henry Ford," says Ramsey. "It was no longer permissible for Henry to preside with his own hands the company he had created. However, he was still part of the board of directors. What influence do you think Henry Ford would have on the company as a director and CEO compared to its president? Absolute. Same thing with Musk. "

Shih says, "Musk has too much of himself in the business right now. He probably does not want to give up that control. And since he does not tolerate dissent very well, he will probably try to destroy anyone who arrives with an agenda other than his own. "