Investor's Corner
Tesla is getting unnecessarily weighed down by the SEC’s claims against Elon Musk
Tesla stock (NASDAQ:TSLA) dropped on Monday after the US Securities and Exchange Commission asked a judge to hold Elon Musk in contempt for reportedly violating a settlement that required him to get approval before releasing any social media posts or announcements that could be material to investors. Regardless of the judge’s decision, Elon Musk and the SEC’s run-ins with each other are adversely affecting investors and unnecessarily weighing down Tesla. This is something is best avoided, by the company and Elon Musk himself, in the future.
According to the SEC, Musk’s tweet on February 19, when he mentioned that Tesla will make “around 500K” vehicles in 2019, was a violation of his settlement with the agency last year. Musk later clarified his statement, explaining that he was talking about an annualized production rate of around 500k (roughly 10k cars per week) vehicles by 2019’s end, but that deliveries for the year are “still estimated to be about 400k.”
Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.
— Elon Musk (@elonmusk) February 20, 2019
The SEC claimed in papers filed in a Manhattan court that Elon Musk “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers, including members of the press, and made this inaccurate information available to anyone with internet access.” The SEC’s announcement adversely affected the company’s stock, sending TSLA plummeting 4% on Monday’s after-hours following the announcement. It did not take long before some of the company’s staunchest critics began to predict that Musk will be incarcerated.
Despite the company’s critics calling for Musk to be sent behind bars, Peter Haveles, a partner at Pepper Hamilton in New York whose practice specializes in commercial and regulatory disputes, noted in a statement to The Verge that another fine will likely be the result of the SEC’s claim against the Tesla CEO.
“Mr. Musk will try to argue that it’s a one-time thing, and the issue will be, is that really the case? Will the SEC come forward with evidence from Tesla that they are struggling to get Mr. Musk to comply with the process? It’s unlikely that Musk will face being barred from serving as a director or officer of a publicly traded company for the tweet,” he said, later adding that Elon Musk’s tweet doesn’t rise to the level of criminal contempt; and thus, the CEO does not have to worry about jail time.
Nevertheless, it should be noted that while the SEC might be a bit aggressive with its request to have the CEO held in contempt of court due to his February 19 tweet, Musk could have avoided the entire issue altogether if he had just been more careful. And it’s not like this is the first time such a thing happened either, as it was his Twitter activities that landed him in hot water last year due to his now infamous “funding secured” announcement.
It will likely be difficult for the SEC to prove that Elon Musk’s tweets were a violation of his settlement’s terms. For one, Musk’s February 19 tweet was made while markets were closed. Thus, it will be very challenging to gauge the “materiality” of the announcement. Musk also mentioned the same figures weeks before during the Q4 2019 earnings call, when he estimated that Tesla could produce “maybe in the order of 350,000 to 500,000 Model 3s” this year. Musk mentioned this in a later tweet, stating that the SEC seemed to have forgotten to read the transcript of Tesla’s Q4 earnings call.
SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing … 🤗
— Elon Musk (@elonmusk) February 26, 2019
It is difficult to not see a certain bias emerging from the SEC against Musk’s Twitter activities, considering that the tweet in question did not really affect Tesla stock and the estimate was already public knowledge due to the fourth quarter earnings call. In a way, it almost seems like the SEC’s recent initiative against Musk is response of sorts against the CEO’s statements against the agency. Musk has mocked the agency on Twitter in the past, dubbing it as the “Shortseller Enrichment Commission,” and in a 60 Minutes segment, he flat-out admitted that he does not respect the SEC. Ultimately, the SEC’s claim would have to rely on the premise of Elon Musk posting his Tesla-related tweet without the message being vetted first, as agreed upon in last year’s settlement.
Tesla is at a point in its history where the company could grow into one of the most potent forces in the auto industry. With Model 3 production stabilized, Gigafactory 3 under construction, and vehicles like the Model Y set to be revealed, tweets like Musk’s February 19 announcement are things that the company can do without. If led by a more careful, more calculating Elon Musk, Tesla’s inevitable rise to power will most definitely happen sooner than expected.
As of writing, Tesla shares are trading -3.52 at $288.25 per share on Tuesday’s pre-market.
Disclosure: The opinions presented in this article are the author’s alone, and do not necessarily reflect the stand of Teslarati. I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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