Tesla CEO Elon Musk is on unclear legal footing after his bizarre Twitter rant sent stocks of the electric car company in a freefall, wiping $14 billion from the company’s market capitalization and $3 billion from Musk’s net worth.
‘Tesla stock price is too high imo,’ Musk tweeted on Friday, before going on to vow to sell off his physical possessions and recite part of the national anthem.
Markets reacted quickly, sending the company’s stock plunging more than 10 percent for the session.
Musk, who has been an outspoken opponent of coronavirus lockdown restrictions that have shuttered Tesla’s key factory in Fremont, California, is currently bound by a settlement with the Securities and Exchange Commission that required Tesla to put in place ‘controls and procedures’ to oversee the CEO’s tweets.
In 2018, Musk settled the SEC allegation of securities fraud without admitting or denying the charge, after he tweeted that he had ‘funding secured’ to take Tesla private at $420 a share, when in fact no such funding had been secured.
Now, Musk has hinted that company attorneys did not review his latest tweet about the company’s shares being overvalued. Asked whether he was joking or if he’d had his tweet vetted before posting it, Musk replied to the Wall Street Journal in a one-word email: ‘No.’
‘Tesla stock price is too high imo,’ Musk tweeted on Friday, before going on to vow to sell off his physical possessions and recite part of the national anthem
‘Tesla stock price is too high imo,’ Musk tweeted at around 11:11am Eastern Time on Friday
Right after he posted this tweet, Tesla shares began a precipitous nosedive on Wall Street. By the closing bell on Friday, Tesla was trading at $701.32, down more than 10 per cent
Legal experts admit to being baffled as to whether Musk’s latest tweet violates securities law, saying they can think of no other circumstances where a CEO has tried to drive down the price of his company’s stock with casual statements.
‘I don’t see anything actionable here,’ attorney Evelyn Cruz Sroufe, a partner at Perkins Coie who specializes in corporate governance, told The Verge.
For the tweets to qualify as securities fraud, the SEC or a plaintiff would have to show that Musk would have profited from a drop in the stock price, for instance by holding a short position.
‘This looks instead to be just Musk sounding off,’ Sroufe said. ‘His use of ‘imo’ also puts his statement into the realm of personal opinion, for which there is latitude,’ she added, referring to the abbreviation for ‘in my opinion.’
Others say that in order for an action to qualify as market manipulation, the government only needs to show intent, not person gain.
‘He doesn’t need to benefit, though benefit is often how the government proves intent,’ Alma Angotti, a partner and co-head of the global investigations and compliance practice at Guidehouse, told the outlet.
Tesla shares still remain up almost 50 percent from the start of April.
‘We view these Musk comments as tongue in cheek and it’s Elon being Elon. It’s certainty a headache for investors for him to venture into this area as his tweeting remains a hot button issue and the Street clearly is frustrated,’ Wedbush Securities analyst Daniel Ives said by email.
Musk’s tweet about Tesla’s valuation was only the beginning of an erratic stream of tweets on Friday that included misquoted lyrics of The Star Spangled Banner as well as a strange pledge to sell his possessions.
Musk also tweeted: ‘Now give people back their FREEDOM.’
That tweet is likely a reference to Musk’s controversial comments slamming the coronavirus lockdown, which he called ‘fascist’ on Wednesday.
The tech entrepreneur, who according to Forbes is worth more than $38 billion, also tweeted that he intends to sell ‘almost all physical possessions.’
‘Will own no house,’ Musk tweeted. He then remarked: ‘Just one stipulation on sale: I own Gene Wilder’s old house.
‘It cannot be torn down or lose any its soul.’
In November 2013, Musk purchased a three-quarter-acre Bel Air home for $6.75 million.
That property once belonged to Wilder, the late Willy Wonka actor who died in 2016. Musk has since turned the property into a private school.
Musk also tweeted: ‘I am selling almost all physical possessions. Will own no house’
Musk, who has blasted the coronavirus lockdown as ‘fascist,’ also tweeted: ‘Now give people back their FREEDOM’
He then posted a series of tweets that contained the lyrics of The Star Spangled Banner
The home is one of six that Musk bought within walking distance of each other.
Musk also purchased a seventh home near Tesla headquarters in Northern California.
In total, he has spent more than $100million for seven properties since 2012, according to The Wall Street Journal.
Musk then remarked on Twitter that his girlfriend, the musician Grimes, was mad at him.
In response to another Twitter user, Musk revealed that Grimes, who is pregnant, is due to give birth on Monday.
Last week, rumors spread across Twitter claiming that Musk and his Canadian love interest planned to name their child Influenza.
However, the false claim, which came to light earlier this week, seems to have originated from a fake news site called World Grey News earlier this week.
An article headlined ‘Grimes named her child WHAT’ included a false BBC News logo and even a fake quote from the artist confirming the unborn child’s name.
The baby will be Musk’s sixth child.
The South Africa native was first married to Canadian author Justine Musk, with whom he has five children.
Their firstborn died of sudden infant death syndrome at the age of 10 weeks.
Musk was married twice to British actress Talulah Riley. The couple also divorced twice.
Piers Morgan wondered if Musk was ‘on the wacky-baccy again’
Another Twitter user commented that Musk has ‘gone off the deep end’
Michael Tannenbaum commented that ‘someone should unplug Elon Musk, wait ten seconds, and then plug him back in’
‘Elon Musk is 100% cocaine powered,’ tweeted a parody account of God
Musk also had a brief, highly publicized relationship with Johnny Depp’s ex-wife, Amber Heard.
Musk on Friday also attempted to recite the Star Spangled Banner, tweeting: ‘And the rocket’s red glare, the bombs bursting in air…gave proof through the night that our flag was still there…Oh, say does that star-spangled banner yet wave…O’er the land of the free and the home of the brave?’
He then tweeted: ‘Rage, rage against the dying of the light of consciousness.’
On Twitter, some wondered if Musk was smoking marijuana – as he famously did during an interview on Joe Rogan’s podcast in September 2018.
Piers Morgan wondered if Musk was ‘on the wacky-baccy again.’
Another Twitter user commented that Musk has ‘gone off the deep end.’
Michael Tannenbaum commented that ‘someone should unplug Elon Musk, wait ten seconds, and then plug him back in.’
‘Elon Musk is 100% cocaine powered,’ tweeted a parody account of God.
Musk’s real estate portfolio includes a cluster of six homes spread out across just two streets in the Bel Air section of Los Angeles. The homes (four of which are circled above) are within walking distance of each other
This home owned by Elon Musk in Bel Air was purchased for $17 million in 2012
This home was owned by Gene Wilder and was purchased for $6.75 million and was converted into a private school
The Tesla billionaire also purchased this home in the Bel Air neighborhood (smallest circle on the left on map)
Elon Musk owns this Bel Air home along with his other Bel Air properties (located on the bottom left portion of the map)
Early last year, Musk paid $6.4million for this white Colonial home in a Bel Air cul-de-sac nearby
In recent days, Musk has vented over the ongoing coronavirus lockdown.
Even though his company has reported healthy earnings, one of the biggest disruptions to Tesla has been the government-ordered shutdown of its factory in Fremont, California, which began on March 24.
Alameda County, where the factory is based, on Wednesday extended stay-at-home orders until May 31 and vehicle manufacturing is not considered an essential business that is exempt.
On a conference call on Wednesday, Musk said he did not know when they could resume production.
‘I think the people are going to be very angry about this and are very angry,’ Musk said as he went off track in the call about earnings.
‘It’s like somebody should be, if somebody wants to stay in the house that’s great, they should be allowed to stay in the house and they should not be compelled to leave.
‘To say that they cannot leave their house and they will be arrested if they do, this is fascist. This is not democratic, this is not freedom. Give people back their goddamn freedom!’
The strictest stay-at-home orders recommend that people only leave their homes for essential trips such as visiting the grocery store or pharmacy.
Tesla shut down the California factory just as it was ramping up production of its new electric crossover utility vehicle Model Y, which it expects to generate record demand and higher profit margins.
Tesla on Wednesday said the Model Y was already contributing profits, marking the first time in the company’s history that a new vehicle is profitable in its first quarter.
Musk on Friday also revealed that his girlfriend, the musician Grimes, is set to give birth on Monday. The couple is seen above in New York City in May 2018
‘Baby due on Monday,’ the Tesla CEO tweeted on Friday
Musk tweeted that Grimes was ‘mad at me’ for pledging to sell his possessions
Last month, Tesla said production and deliveries of its Model Y sports utility vehicle were significantly ahead of schedule, as it delivered the highest number of vehicles in any first quarter to date, despite the outbreak.
Tesla reported that it eked out a first-quarter net profit on Wednesday.
The electric car and solar panel company said it made $16million from January through March, its third-straight profitable quarter.
Excluding items, Tesla posted a profit of $1.24 per share. Analysts had expected a loss of 36 cents per share.
Tesla shares are also up for the year after recovering from a sharp slump in March.
But Musk called the state stay-at-home order a ‘serious risk’ to the business.
‘So the expansion of the shelter in place or as frankly I would call it, forcibly imprisoning people in their homes, against all their constitutional rights, is my opinion, and breaking people’s freedoms in ways that are horrible and wrong, and not why people came to America or built this country, excuse me,’ Musk added later.
‘It’s an outrage. It will cause loss, great, great harm, but not just to Tesla, but any company. And while Tesla will weather the storm there are many small companies that will not.’
Tesla produces a fraction of the cars of its rivals but has a much larger stock market value on expectations of tremendous growth.
Musk said that while other carmakers were cutting back, Telsa was ramping up investment.
He said Tesla might announce the location of a new US factory in one to three months.
Tesla said it could not predict how quickly vehicle manufacturing and global supply chains will normalize, saying it would revisit full-year guidance for net income and cash flow when it reports current-quarter results in three months.
Musk tweeted later on Wednesday that ‘hospitals in California have been half empty this whole time’
Musk replied to Kimbal Musk who said Colorado ‘is doing well’ and ‘our governor has ended the stay at home order’
Tesla in January said it expected positive quarterly cash flow and positive net income going forward.
The company on Wednesday did not update its previous forecast of delivering half a million vehicles by the end of 2020.
Tesla said its free cash flow had been impacted by growing inventory due to coronavirus shutdowns.
The COVID-19 pandemic has disrupted demand for cars, with automakers including Tesla forced to furlough workers and close factories.
Vehicle demand in the United States has dropped as much as 80% in some hard-hit areas in March, but some analysts said sales appeared to recover slightly in the first two weeks of April.
Tesla’s factory in Fremont, California is seen in a file photo. The closure of the Fremont plant came just as Tesla was increasing production of its new Model Y sport utility vehicle
The electric carmaker did not say when it planned to resume production at its Fremont plant.
But Tesla on Wednesday said it expected production at its vehicle factories in Fremont, California and in Shanghai, China to ramp gradually through the second quarter.
The company said operations at its Shanghai plant were progressing better than expected, with production rates of its Model 3 sedan expected to hit 4,000 units per week, or 200,000 per year, by mid-2020.
It delivered 88,400 vehicles during the first three months of the year, a 40 per cent increase from a year ago.
That was aided by production at its new factory in Shanghai.
It said gross margins at its Shanghai factory were approaching those of Model 3 production in the United States.
Automotive gross margins in the first quarter jumped to 25.5 per cent overall.
Alongside a link to a Wall Street Journal op-ed about whether lockdowns are saving lives, Musk tweeted: ‘Give people their freedom back!’
Musk also tweeted a link to a local news story about Texas lifting some restrictions this week, saying: ‘Bravo Texas’
Musk had earlier hit out at Silicon Valley, saying it had become ‘Sanctimonious Valley’ and ‘too much the moral arbiter of the world’
But of the $5.1billion in overall automotive revenue, nearly 7 per cent were due to regulatory credits – money Tesla receives from other automakers that buy the company’s carbon emissions credits to meet stricter regulation.
Revenue from those credits nearly tripled from the last quarter.
Hargreaves Lansdown analyst Nicholas Hyett also flagged that Tesla’s free cash flow was negative last quarter and improved only modestly on a yearly basis.
‘The immediate future doesn’t look like the ideal time to be selling premium priced cars, so perhaps it’s no surprise guidance has been paused,’ Hyett said.
On Wednesday, Musk tweeted his opposition to California shuts downs as he complained: ‘Hospitals in California have been half empty this whole time.’
He also retweeted his brother Kimbal Musk who said Colorado ‘is doing well’ and tweeted that the governor ‘has ended the stay at home order’.
‘Bravo!’ Elon Musk tweeted at Governor Jared Polis.
Musk tweeted on March 6 that ‘the coronavirus panic is dumb’ but later offered to supply hospitals with free ventilators.
Then on Tuesday, Musk and a host of critics slammed YouTube for removing a video of two doctors suggesting COVID-19 death tolls are being boosted and urging an end to lockdowns because they do more harm than good.
Musk had previously shared the clip and stated: ‘The docs make good points.’
YouTube took down the video of news conference featuring Drs. Dan Erickson and Artin Massihi, who run a private urgent-care clinic in Bakersfield, California, on Monday because they claim it violated their user policy by disputing health officials.
‘FREE AMERICA NOW,’ the 48-year-old tweeted.
Alongside a link to a Wall Street Journal op-ed about whether lockdowns are saving lives, Musk also tweeted: ‘Give people their freedom back!’
He tweeted a link to a story about Texas lifting some restrictions this week, saying: ‘Bravo Texas’.
Musk later clarified, in response to a tweet from one of his followers, that he believed states should be reopening slowly.
‘Yes, reopen with care & appropriate protection, but don’t everyone under de facto house arrest,’ he tweeted.
Musk had earlier hit out at Silicon Valley, saying it had become ‘Sanctimonious Valley’ and ‘too much the moral arbiter of the world’.
Eccentric billionaire with the loose lips – and Twitter account – is no stranger to controversy
Musk, who is considered a visionary in the world of business, has also gotten into trouble for his antics.
In September 2018, he appeared on Joe Rogan’s podcast and smoked what appeared to be marijuana.
While he didn’t break any laws since weed is legal in California, where the podcast was taped, the episode fueled perceptions that Musk was too wild and out of control for a chief executive of a major corporation.
The 48-year-old billionaire accepted a joint from the host, Rogan, after a rambling conversation that also took in the dangers of AI and the possibility China is spying on US citizens through their phones.
The full experience: Tesla founder Elon Musk was seen smoking a joint on Joe Rogan’s podcast in September 2018. Hours later, Tesla’s share price dropped by nine per cent
Hours later, Tesla’s chief accounting officer Dave Morton resigned citing ‘public attention’ on the company.
Meanwhile, shares plummeted in the wake of the spectacle, wiping $4.3 billion off the company’s value.
It followed weeks of serious turbulence for both Musk and Tesla, after he falsely announced he was taking the company private in a deal with Saudi Arabia and accused a British hero diver of being a paedophile.
A month prior to the pot-smoking incident, Musk tweeted that he had ‘funding secured’ to take Tesla private at $420 per share.
That tweet prompted the Securities and Exchange Commission to file a lawsuit against Musk.
Musk settled the lawsuit, agreeing to step down as chairman and have the company’s lawyers pre-approve written communications, including tweets with material information about the company.
Musk and Tesla were ordered to pay $20million each to the federal government to settle the lawsuit.
Last month, a federal judge said Tesla and Musk must face a lawsuit by shareholders over the going-private tweet, including a claim that Musk intended to defraud them.
In April 2019 Musk tweeted, ‘My Twitter is pretty much complete nonsense at this point.’
In the summer of 2018, Musk generated headlines after he referred to a British diver who took part in the rescue of 12 boys trapped in a water-flooded Thai cave, as a ‘pedo guy.’
The diver, Vern Unsworth, sued Musk for defamation, though a Los Angeles court determined that Musk was not liable for damages.
In the summer of 2018, Elon Musk (left) referred to Vernon Unsworth (right), a British diver who took part in the rescue of 13 trapped people in a water-flooded Thai cave, as a ‘pedo guy.’ Unsworth unsuccessfully sued Musk for defamation
In August 2018, Musk apologized after he referred to a Wall Street analyst as a ‘boring bonehead’ and said another’s questions were ‘so dry they’re killing me.’
The comments came after Tesla reported mixed results for the second quarter, posting a wider-than-expected loss, while simultaneously predicting it would turn a profit for the first time ever in the second half of the year.
In May of that year, Musk went on a Twitter rant blasting journalists for their coverage of Tesla.
Musk took ‘big media companies’ to task in a series of tweets, saying the public doesn’t respect them anymore because of their ‘holier-than-thou hypocrisy’ and because they ‘claim to the truth, but publish only enough to sugarcoat the lie’.
Musk this week slammed coronavirus lockdown measures by tweeting ‘Free America Now’ as he joined protesters from across the country in demanding restrictions be lifted
After a reporter from the Verge retorted by calling him a ‘media-bating Trump figure,’ Musk sharply replied by saying President Donald Trump was elected because no one believes the media anymore.
He rounded out the spectacle by saying that he plans to create a site called ‘Pravda’, a reference to the state-run Russian news agency, where people can rate journalists.
More recently, Musk has generated controversy over his criticism of the coronavirus lockdown ordered by state governments in an effort to stop the spread of the contagion.
During an earnings call with investors earlier this week, Musk blasted the lockdown as ‘fascist.’
‘Give people back their goddamn freedom,’ Musk said.
He also complained of the impact that the lockdown has had on his company.
Musk compared the lockdown restrictions to ‘forcibly imprisoning people in their homes.’
Musk’s iconoclastic stance has helped him attract over 33 million followers on Twitter and is seen as a marketing boon for Tesla.
Tesla’s recent rally has put Musk on the verge of a payday of over $750 million.
The six-month average of Tesla’s market capitalization is just short of $100 billion, a target that would trigger the vesting of a tranche of options granted to Musk to buy 1.69 million shares as part of his two-year-old pay package.