Reference no: EM132223767
Billionaire Elon Musk's $40 Million Tweet May Be A Blessing For Tesla After Settling Fraud Suit.
A tried-and-true platitude for many entrepreneurs is that one learns more from mistakes than from successes. The maxim may prove especially true when it comes to automotive and aerospace billionaire Elon Musk and his $45 billion electric car giant Tesla.
In August, Musk used his Twitter TWTR +0.21% account to float a buyout of the company for a price of $420 a share, stating he’d secured funding for the take-private and had shareholder support. The price, as it turns out, was a veiled drug joke to Musk’s then-girlfriend Grimes and was pulled mostly out of thin air. No surprise, the tweet sent Tesla into a frenzy as the company tried to cover for his misleading claim. In the ensuing six weeks, Musk caused confusion among his loyal shareholder base, drew the wrath of the Securities & Exchange Commission, and set a new low in management behavior absent blatant fraud.
As it turns out, Musk is getting away with a slap on the wrist for his lies to the investing public. He and Tesla will pay a fine of $20 million apiece to resolve the SEC’s fraud suit without admitting or denying guilt, putting an end to a probe that could have prompted Tesla’s demise. Better yet, the SEC’s other nonmonetary penalties may be the best thing to happen to Tesla and Musk in some time.
Tesla has agreed to strip Musk of his chairmanship and appoint two new independent directors to its board. In addition, Tesla will now have to manage Musk’s often confusing and misleading communication habits, mostly on social media. The SEC is basically requiring Musk to take a timeout from Twitter when it comes to Tesla (good advice for us all).
On Friday, Tesla and Musk were rocked when the SEC charged the billionaire with fraud, accusing him of manipulating markets by tweeting out the speculative and incredible buyout offer. Shares in the carmaker plunged over 13% to 2018 lows as the SEC sought to strip Musk of his chief executive and chairman roles at the company. Few investors or employees can imagine a Tesla without Musk as ringmaster of the circus.
Please answer the following:
In your own words, what actions by Elon musk triggered the SEC actions & fines?
Do you feel as though the fines & punishment were appropriate? Why or why not? Do you think the punishment was too severe or too weak?
Did Elon Musk commit some type of fraud? Support your answer with rationale.