In case you missed it, Tesla Motors CEO Elon Musk has stepped down as Chairman of the car company that he co-founded, reaching a settlement with the U.S. Securities and Exchange Commission (SEC) that bars him from being Chairman for a minimum of three years. He also had to pay a $20-million fine, with both penalties relating to his claim via Twitter in August that Tesla had secured the funding necessary to take the company private at $420 per share (per The New York Times). The SEC decided that the Tesla Motors CEO’s Twitter claim was misleading its investors, suing the 47-year-old businessman in federal court.
This raises the question: could the Tesla Motors CEO’s tiff with the SEC present an opportunity for the likes of General Motors? GM, too, has a keen interest in helping electric propulsion to proliferate, announcing in June its plans to launch 20 new battery-electric vehicle models by 2023, and cars like the Chevrolet Bolt EV and Chevrolet Volt plug-in hybrid have garnered plenty of praise from industry pundits. Yet Tesla Motors’ market capitalization today stands at $52.2 billion – nearly $5 billion more than General Motors’ market cap – and its shares trade at nine times the price.
Tesla’s share value slid dramatically after the news that its CEO was being sued by the SEC, losing 12 percent between September 27th and 28th, although it’s since recovered to about the same value as before the news broke. Shares are still trading far below where they were just after Tesla Motors CEO Elon Musk released his Tweet claiming the company had the funding to go private, however, when value peaked at around $380 per share.
Nonetheless, if there is an advantage to be had by General Motors, it won’t be from a loss of share value on the behalf of Tesla – at least not in the short-term. Musk’s settlement with the SEC allows him to stay on as Chief Executive Officer, meaning he’ll continue to exercise plenty of control at the electric carmaker, and his devoted fans have no immediate reason to jump ship.
But many see the Tesla Motors CEO’s recent actions as erratic and unpredictable, and the SEC suit might prove to represent a pivotal moment in a chain of events that ends nowhere good for Musk or Tesla. This might be especially true depending on who is made Chairman at the electric carmaker; if Musk continues to attract negative attention, the chances of an ouster might now be substantially higher. Unfortunately for Tesla, much of the company’s high valuation – and indeed, its success – appears to be wrapped up in the cult of personality surrounding Musk.
The next few months might be interesting indeed.