The alleged deal worth $30 billion for privatization of Tesla Motors is finally bearing some heavy consequences for Elon Musk. The take-Tesla-Private game has led Musk to step down as chairman of the Electric car company and Tesla and Musk both have agreed to pay a penalty worth $20 million each for the settlement of a lawsuit brought by Securities & Exchange Commission alleging that Musk turned down the initial deal last minute, as a part of compensation to be paid to the afflicted investors.
According to the new agreement, Elon Musk will resign as Tesla chairman within 45 days of the lawsuit by SEC and but will remain the CEO. He is not likely to be appointed as chairman for at least three years’ time duration. Now its time for Tesla to hire an independent chairman to look after the company, in order to amuse a number of shareholders who have criticized that Tesla’s board is too beholden to Elon Musk for its majority of decisions. Contrary to the expected $20 billion fortune and Tesla’s revenue reaching to $4 billion mark at the end of June 2018, this dramatic chapter that was ignited on Twitter started off on August 7, 2018 when Musk tweeted his consideration for taking Tesla private at $420 /share.
In words of Michelle Krebs, the executive analyst at Autotrader,
"A reckless tweet cost a lot of money - the $20-million tweet."
Since it wasn’t clear that how much groundwork had been laid for such potentially significant business decision, such revelation of misleading information on social media is illegal for companies and executives as per the SECs lawsuits and considered a security fraud. Tesla is also hiring a lawyer, to keep a watch on Musk’s communication, as according to SEC’s allegations, the company failed to maintain disclosure controls or procedures, related to Musk’s Twitter activity. In other words, he is going to get a Twitter babysitter.
Tesla’s stocks plummeted, erasing more than worth $7 billion in shareholder wealth and further dropped by 30 percent since August 2018. According to the predictions made by some analysts, its stock market is expected to fall even more. The steep curve in Tesla’s market value has motivated Musk to change his decision & negotiate a settlement. Finally, the settlement has been acquired by both Musk and Tesla by neither denying nor admitting to SEC’s allegations.
Apart from this, questions are being raised about the unethical behavior of Elon Musk. He has been observed raising hackles when some stock market analysts posed standard questions regarding Tesla's shaky finances. Moreover, he was also called out for calling a diver, who helped rescue twelve boys from a flooded cave, a pedophile, triggering a defamation lawsuit. A widely circulated video of Elon Musk where he was apparently smoking marijuana, a legal drug in California, Tesla’s home state, has raised many controversies related to his erratic behavior and many analysts have predicted that Tesla needs a replacement for its CEO as well.
Tesla is also facing many past challenges regarding manufacturing problems and wants to raise its production to improve its profitability and recover from past losses. Elon Musk has also pledged to increase Tesla’s production to 7,000 vehicles per week to raise it profitability in the market. Tesla also have incurred debt of approximately $ 1.3 billion and the cash pile is likely to grow if enough profits are not attained timely.
Following recent events, there is a hope that Tesla’s board might take some appropriate decision to improve the situation of the company. Precisely, removing Elon Musk as chairman, but letting him to remain the CEO might bring about some positive changes for Tesla.
Written by:
Arshiya Gahlot