In 1985, when Steve Jobs was shown the door, hardly anyone appreciated the visionary in him. Three decades later, Elon Musk is standing at a similar crossroad. If it was the Apple Board that became blinded by Job’s “insensitive” working style in 1985, this time it’s the Securities and Exchange Commission (SEC) that has a problem with the Tesla CEO’s one single tweet.
Both men had ample opportunity to bow down and avoid an ouster. Then Apple CEO John Sculley just wanted to reassign Jobs away from the unprofitable Macintosh product line. However Jobs did not want to be sidelined in a company that he founded, and so, he walked out.
Elon Musk too was offered a peace deal, with reasonable clauses including paying a nominal fine and stepping down as the Chairman of the company for two years. He did not even have to admit guilt as part of the agreement. However, Musk gave a thumbs down in the last minute as he felt he wouldn’t be doing justice to himself.
So is Musk really guilty?
It is difficult to assess on what grounds the findings were made by the SEC. During the press conference, co-director of the SEC’s enforcement division Steven Peikin said, “We allege that Musk had arrived at the price of $420 by assuming 20% premium over Tesla’s then existing share price then rounding up to $420 because of the significance of that number in marijuana culture and his belief that his girlfriend would be amused by it.”
Quite astonishingly, I see only assumptions in this statement. Kicking a CEO out of his own company is serious business, and I was looking for more than just assumptions.
SEC alleges in the statement, “Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions.” It’s true that Musk’s tweet was misleading, but was it intentional to be called fraud? The SEC is unclear about it.
Perhaps a denunciation in the strongest words would have served the purpose better.
Who benefits from the ouster of Musk?
Frankly, I am not an Elon Musk fan. But there is no argument that Tesla is a company that is built upon the trust on the CEO. Despite the delivery crisis and regular rebukes, Musk has managed to hold together his follower-base. Without him, the company would crumble like a house of cards. The Wall Street Journal resonated these viewpoints in an article titled A Tesla Without Elon Musk Would Threaten Electric-Car Maker’s Future published on September 28.
Barclays analyst Brian Johnson said in an investor note on Friday, “The SEC civil action may lead to Musk’s exit from Tesla (either permanently or temporarily) and the Musk premium in the shares dissipating. Tesla shares have ~$130 of Musk premium for future success that might dissipate.” The Tesla board knows this and has provided whole-hearted backing to Musk.
It’s true that Musk’s tweet was misleading, but was it intentional to be called fraud? The SEC is unclear about it.
Are investors and stockholders benefited from this move? Will an ouster help investors more than a strong censure? It’s doubtful.
Elon Musk may be irresponsibly smoking pot live or calling names publicly. But he is a big contributing factor to the American manufacturing and space exploration industries. The SEC should rather be taming him, than thwarting him.
Tesla shares were trading down 12.2% at 11:10 AM ET.
DISCLAIMER: The article does not necessarily imply the views of AlphaStreet, and contains opinions of the author alone.