When it comes to which of the calamitous issues facing billionaire Elon Musk is worse, the competition is fierce. The declining fortunes of Twitter has to be a big contender, the 67 per cent fall in Tesla’s share price over the past year is a nightmare, but more immediately the start next week of a trial against Musk rates high.
The world’s second-wealthiest man is under attack. He is now fighting fires on three fronts.
The court case will make the largest headlines but the quarterly earnings to be released next week by Tesla are crucial.
The trial is a showcase that will put the spotlight on Musk’s lack of a personal filter, his disdain for the regulatory rules on disclosure and obsessive overuse of his Twitter account. In some ways, it will be a referendum on this personal style and credibility.
The legal action stems from Musk announcements in 2018 that he had the financing in place to privatise Tesla.
The court case was mounted by a group of disaffected Tesla shareholders who alleged they were misled and financially damaged to the tune of billions of dollars when Musk failed to proceed with a buyout of the company.
In the legal manoeuvrings in the lead-up to the trial, the Musk team has already suffered setbacks, including failing in attempts to have the trial moved away from San Francisco.
His legal team argued media coverage and publicity surrounding Musk’s business moves had “biased” the jury pool.
Musk was responsible for the recent wholesale sacking of around half the Twitter workforce.
But his legendary behaviour extends far beyond California, and he polarises opinion.
Responses to a questionnaire filled out by potential jury members reportedly contained responses including: “I think he’s a little off his rocker, on a personal level,” while another described him as “not a very likeable person”.
Meanwhile, the judge has already issued a pretrial ruling that Musk’s tweets were reckless and false and will instruct the jury accordingly.
Handicapped as Musk might be, those making the case must convince a jury that his comments were misleading and that the tweets were material enough to move Tesla’s share price.
Or should it be a case of “listener-beware” when it comes to interpreting throwaway or deliberate remarks made by Musk.
The US regulator certainly took issue with Musk’s disclosure at the time and hit him and Tesla with fines totalling $US40 million ($57 million), forced him to vacate the chairman’s role, and insisted the company appoint two independent directors.
The trial is a showcase that will put the spotlight on Musk’s lack of a personal filter, his disdain for the regulatory rules on disclosure and obsessive overuse of his Twitter account.
At that time, the Securities and Exchange Commission said Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings. Nor did it have sufficient processes in place to ensure that Musk’s tweets were accurate or complete.
As much as this represented a public relations black eye for Musk, his credentials and his finances were far more damaged by last year’s acquisition of Twitter.
What looked like an appalling takeover at the time has only gotten worse as advertisers have abandoned the social media group and banks that lent Musk $US13 billion to finance the deal are reportedly preparing to take big losses.
Musk needs a win and the only place to find one will be via Tesla.
The company has regularly beaten market estimates in the past, the delivery numbers fell short in the December quarter. But this time around the challenges are greater. Tesla has dropped the prices on its electric vehicles in recent times to spur demand.
But the company has also needed to deal with commodity cost inflation and COVID disruptions in its China manufacturing.
That said the Tesla share price has defied the odds in since the start of the year – up more than 21 per cent.
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Source: Thanks smh.com