Elon Musk Saves Tesla with 11th Hour SEC Deal
// SEC sues Elon over “taking Tesla private at $420” tweet; Elon steps down as chairman, but stays CEO in settlement with SEC
- The SEC suit was seeking to bar Musk from serving as an officer or director of any publicly traded company if found guilty
- SEC press release: https://www.sec.gov/news/press-release/2018-219
- original tweet: https://twitter.com/elonmusk/statuses/1026872652290379776
- Elon had a settlement planned with the SEC before they announced the lawsuit but then backed out, according to the New York Times: https://www.nytimes.com/2018/09/28/business/elon-musk-tesla-sec-deal.html
- According to that settlement, Elon would have had to step down as CEO of Tesla within 45 days and not become CEO again for two years. Tesla would have also had to pays tens of millions of dollars in fines.
- From the NYT story: The settlement with the S.E.C. was a “neither admit nor deny” deal, meaning that Mr. Musk would not have acknowledged knowingly committing a violation. Mr. Musk, however, would not have been allowed to publicly state that he had done nothing wrong — and that was something he couldn’t accept, according to three people familiar with the talks.
So on Thursday morning, as settlement papers were being drawn up and news releases were being drafted, Mr. Musk walked away. Lawyers, Tesla executives and advisers to the company were stunned that he would turn away from such a favorable settlement.And the S.E.C., taken aback, quickly changed course and upped the ante significantly. On Thursday afternoon, the agency sued Mr. Musk, seeking to bar him from serving as an executive or a director of a public company. If it wins, Mr. Musk will lose the company he co-founded. Tesla stock fell 14 percent on Friday
- Then it appeared that Elon was gearing up for a fight with the SEC, as he added a lawyer to his team who previously represented Mark Cuban when he was sued by the SEC for insider trading. However, he reversed course and on Saturday announced his settlement with the SEC. The settlement appears to be similar to the original one he had planned, except this one lets him stay CEO but step down as chairman (whereas before he would have stepped down as CEO but possibly remained chairman, as Tesla’s largest shareholder)
- Full settlement agreement: https://www.scribd.com/document/389746303/gov-uscourts-nysd-501755-6-0#from_embed
- Terms: forces him to step down as chairman, but can remain CEO. Musk pays $20 million in fines and Tesla pays $20 million in fines.
- Question (for you, for audience): Why was staying CEO more important to Elon than staying Chairman?
- Stock nosedived 13.89% when the lawsuit was announced and has yet to recover
- According to the Wall Street Journal, Musk thought he had a verbal agreement in place with Saudi Arabia’s sovereign wealth fund https://www.wsj.com/articles/elon-musk-believed-he-had-verbal-agreement-with-saudis-for-tesla-buyout-1538172847
- This was possibly a preview of how Elon was planning to defend himself against the SEC lawsuit, before he decided to settle. And it’s why Elon believes he wasn’t guilty of anything.
- (Note: “sovereign wealth fund” is a type of state-owned investment fund. The official name of Saudi Arabia’s sovereign wealth fund is the Public Investment Fund of Saudi Arabia)
- Tesla sources originally said they expect the company to be sued as well, but it had not yet been named as a defendant. It’s possible that Elon changed his mind about settling in order to protect the company from being sued.
//Tesla reportedly going to hit Q3 production targets (not official reports yet)https://electrek.co/2018/09/28/tesla-model-3-production-goal-achieved-record-quarter/
- Tesla produced more than 51,000 Model 3s this quarter, per Eletrek’s source
- Tesla produced 5,000 Model 3s in a week for the first time since the July production sprint. Is this the beginning of sustained production at that level? Total vehicle production for the week was around 6,700 vehicles
- Hitting these numbers in the 3rd and 4th quarters is crucial to Tesla becoming profitable: https://money.cnn.com/2018/09/28/technology/tesla-production/index.html
// Tesla ramping up full autopilot, asking employees to be beta testershttps://www.bloomberg.com/news/articles/2018-09-28/tesla-enlists-employees-to-be-full-self-driving-beta-testers
- Elon asked Tesla employees to volunteer to be beta testers for full self-driving, offering $13,000 of incentives in exchange (free full self-driving – $8,000 – and free premium interior – $5,000 – on a new Tesla) in exchange for 300 to 400 hours of detailed feedback on autopilot.
- Looking for 100-200 employees: https://electrek.co/2018/09/28/tesla-employees-testing-full-self-driving-free-autopilot/
- Part of the upgrade to version 9 firmware, which will start the transition from “Enhanced Autopilot” to “Full Self-Driving Capability”
- New “Navigate on Autopilot” demo: https://www.youtube.com/watch?v=hcSy9uZm-aE
- Related: Tesla bull Gene Munster says he doesn’t think Tesla will be able to fulfill its promise that all vehicles sold since October 2016 will be able to support fully self-driving technology: https://www.businessinsider.com/tesla-will-have-to-refund-some-customers-expert-says-2018-9
// Version 9 firmware will also include integrated dashcamhttps://insideevs.com/tesla-dashcam-teslacam-looks-good/
- Dashcam has been promised for a while, something a lot of customers want: https://insideevs.com/tesla-dashcam-coming-soon/
- Here’s Elon promising it in V9 a couple months ago: https://twitter.com/elonmusk/status/1011143866555088896
// Teslais building its own car carriers to combat extreme shortage of car carrier trailershttps://www.reuters.com/article/us-tesla-musk/tesla-is-making-its-own-car-carriers-idUSKCN1M42HG
- With Tesla seemingly solving production challenges, the next hurdle is distribution. This could be one solution.
- It’s likely that Tesla didn’t sign long-term contracts with trucking companies and was relying on short-term “spot” contracts instead and is now unable to ramp up delivery on those contracts so quickly.
// Tesla owners come out to help support new deliveries as Q3 wrapshttps://www.forbes.com/sites/lianeyvkoff/2018/09/24/tesla-owners-bailing-musk-out-of-delivery-logistics-hell/#15eacced27d0