Actually, Elon Staying at Tesla Is the Best Case Scenario
It grants Tesla all the benefits of Musk's leadership, with fewer liabilities.
Some described it as the most expensive two words ever tweeted. “Funding secured.”
It’s hard to think Elon Musk knew the full extent of what he was doing when he tweeted that he was taking Tesla private.
And the consequences are substantial, even for someone who uses Twitter as recklessly as Musk. The Securities and Exchange Commission (SEC) slapped him with subpoena and a lawsuit. On Saturday, Tesla and Musk settled with the SEC. They’ll have to cough up $20 million each, Musk will have to relinquish his seat as chairman for three years, and lawyers will have to oversee his communications.
Musk could have avoided much of the outrage and stock price instability (it dropped 37 points overnight when the SEC first announced its lawsuit, then bounced back even higher than before the suit by Monday morning) if he hadn’t turned down a much tamer settlement last Thursday, the Wall Street Journal and New York Times report.
We may never know what convinced Musk to change his mind and settle with the SEC just two days after the lawsuit (uncharacteristically, he didn’t offer any tweeted insight into his thought process).
But from where we sit now, this could be a great move for the company — and for the future of electric vehicles. The company will get all of the benefits Musk offers, with fewer of the liabilities that come with his leadership.
You’ve likely heard about some of these liabilities. From lashing out at short sellers to making weed jokes (allegedly to impress his girlfriend Grimes) to even getting sued for libel by a British diver he accused of being a pedophile, Musk’s shenanigans have pulled Tesla into financial uncertainty. The SEC settlement really just seems like the culmination of years of shenanigans.
But there are perks of Musk’s leadership, too. He’s charismatic and ambitious with a devoted following. Tesla’s stock has probably only done as well as it has because many people regard Musk as a visionary and savior of the electric car. “Historically, Tesla has had easy access to capital markets, largely due to the public’s perception of Musk as a visionary,” UBS analyst Colin Langan said in a research note, as quoted by Forbes. Kicking him out completely probably wouldn’t be great for Tesla’s business.
The settlement means Tesla gets the best of all worlds. As CEO, Elon still has quite a bit of power over the company, while a new chairman will take control of the board. That means Musk will have to answer to someone new. And the requirement for a lawyer who oversees Musk’s communications — a.k.a his tweets — will help, too. Maybe having an intermediary that can rein in a hotblooded Musk could put an end to the weed jokes, and potshots aimed at short sellers.
The result, if Tesla’s lucky, will be a more predictable Musk, which will mean more stability for shareholders.
The dust is still settling over at Tesla; Musk has 45 days until he has to step down as chairman. We still don’t know how shareholders will react to a future chairman of the board. What will a Tesla without Musk as chairman look like? Whether Musk will relinquish some of that decision-making power to a new chairman (and who that chairman will be) is difficult to say. And will that chairman be able to keep Musk in line when he decides to tweet himself into a corner again?
That’s also hard to say, but one thing is clear: Musk made the right decision in stepping down as chairman. A company like Tesla with such a bold vision of the future is too important.