The following essay was written as a group project in Fall of 2019. For privacy reasons, I will not disclose the names of the additional authors without their permission. The essay had a presentation as well.
Introduction and History of Tesla
Imagine a world that focuses on digital currency in place of physical cash, cars that solely run on electricity eliminating the need for gasoline in our everyday travels, underground tunnels that will efficiently and effectively transport vehicles at speeds up to 150 miles per hour and going from our basic moon landings to trying to colonize Mars. As you may know, we are almost in this futuristic-sounding society already, but we have ways to go. Perhaps this introduction has guided you to think of one gentleman who is trying to bring us to this utopian, or dystopian if you aren’t a fan of the idea of living on another planet, society and that person is Elon Musk. Elon Musk has a profound portfolio and has accomplished much success through his companies including PayPal, Tesla, and SpaceX, but is unceasing in his efforts to carry out his current and future goals. To give you an idea of how hard and how much Elon Musk works, he could be found sleeping on the floors at his factories, pulling 120-hour work weeks because of how much he believes in what he does and how highly determined he is to get done what needs to be done. It has gotten him to his current place today, but he isn’t finished with his creative ideas just yet.
With Elon Musk’s SpaceX company, they have already prospered literally above and beyond what was unimaginable in the past. SpaceX has privately funded their first and their other rockets to go into orbit, their rocket “Falcon 9” is the first rocket to land back on Earth to be reused allowing for cheaper space expeditions, and the successful attempt to reusing their rocket ship by flying it back into space is just key highlights of some of their achievements. One current goal that SpaceX aims towards is putting a human on the big red planet Mars, and at the rate that they are going with the development of new technologies, they might be able to pull it off. Elon Musk’s other company, Tesla, has made a revolutionary impact on our daily commutes allowing us (those who can afford a Tesla vehicle) to drive without the need of gas, implementing autopilot mode, and install other hazard preventing features to make driving safer. For Tesla to continue making such an impact, they have made their patent for eco-friendly technologies to be open source for other car manufacturers to use “in good faith” helping cut the use of harmful substances that are being emitted into our Earth’s atmosphere. Specifically, Elon Musk stated the following on the 12th of June 2014:
Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.
With this statement and proof of action, it is safe to assume that this is a continuous goal that Tesla and Elon Musk hold dearly and will do anything in their power to make EV cars a standard. Today we hear about, read and even see more electric and hybrid cars cruising around putting a spotlight on this improved form of transportation from Tesla. That is all because of Elon Musk’s work ethic and dedication to what he wants to see a change in the world.
While Elon Musk goes through extremes and yet continues to carry out his goals, he is still a human being that makes errors or poor judgment calls. Sometimes these mistakes aren’t as harmful, but in certain cases his judgment costs him and his companies a lot of money, resources, and clout. One drastic mistake that Elon Musk made had caused Tesla a loss of approximately $20 million (Fottrell, 2018). How did Elon Musk get into a position where he could make such a negative impact on a company? It all started with the EV1.
The EV1 was the first electric car and was essentially declared a dead project by General Motors in 2003. The Tesla Motors company, founded with Elon Musk and several other entities as co-founders, adopted the idea of an electric vehicle. Elon Musk, who later became the chairman of Tesla in 2004 and then the CEO in 2008, was determined to improve the failures of the EV1. He wanted to focus on affordability, scalability, and sustainability. Taking all of this into consideration, he then incorporated these ideologies into the Tesla branding. Elon Musk focused the initial project on using lithium-ion batteries to lower the price and build off parts from other car companies. The resulting initial vehicle of the company was the Tesla Roadster (Thompson, 2017). The Roadster would start production the same year Elon Musk became CEO of Tesla. After two years, on the 29th of June 2010, Tesla became a public company for $17 per share. The company was able to offer a little over 13 million shares raising about $226 million. With such success, Tesla has been able to introduce us to their highly futuristic, autopiloted, sleek-looking vehicles. They include the Model X Crossover SUV released in 2015 and the Cybertruck that was just announced in November of 2019.
There is a lot that goes into the process of making a successful company such as Tesla. Behind these successes are the motives that drove the company to where they are today. Tesla’s ability to produce an environmentally friendly vehicle and getting its customers to buy into its mission to change the world all started within the environment of the company.
PEST Analysis of Tesla
From a technological standpoint to a political point of view, there are many ways one can measure the impact of Tesla and how they accomplished so much. As in any business or organization, politics are inevitable whether it be for better or for worse. Tesla as a company has a varied economic standpoint that demonstrates how successful they are, and the cultural trends that they created. Many factors in how the company behaves define how it became a success or failure, and how it affected the rest of the economy.
Tesla had some funding from the government which allowed them to continue their production of Tesla vehicles. However, Tesla wanted to use this funding to minimize carbon emissions that came from the company’s operations and products which they have succeeded in doing. They were also able to take part in new global free trade agreements allowing the company to work internationally. This would also decrease carbon emissions worldwide because Tesla as a company would operate outside the North American region.
Tesla wanted to focus on economic factors of their business making their products cheaper for customers yet efficient. The company was able to decrease battery and renewable energy costs. This, in a way, allowed the company to push a social standard that is still in a rapid change today. Tesla wanted to and continues to market the increasing of low-carbon lifestyles. As Tesla would not only be selling their products, their customers would also be supporters in the fight against climate change by choosing an electric vehicle as an ingenious marketing strategy.
From a social standpoint, the company had a clear focus on environmental friendliness which brought in a large following of enthusiasts. This aligned with many trends in reducing the environmental impact and support of people who focused on these beliefs. This associated the company with the popular trend of lowering personal carbon footprints with more environmentally friendly lifestyles. With more people realizing that renewable energy could be an option for vehicles and day-to-day life, they had the opportunity to increase interest and preference in the trend and make it into a more permanent lifestyle.
Another social focus that Tesla had was bringing the company to new and developing markets and lower-income cities. Making Tesla vehicles more affordable would allow more people to adopt this new low carbon lifestyle. The more people who could afford this vehicle and want to make a positive impact in their everyday life, the more Tesla would be able to market themselves in their unique niche which is electric vehicles. Despite the price though, the technology is highly advanced and continues to be improved as time goes on.
With the rapid changes in technology, Tesla often finds themselves taking advantage of the opportunities that come along with it. They can build vehicles that are much more efficient than traditional automobiles, vehicles that can last longer, have safer driving mechanisms could be added or expanded, and even reducing the costs even further for customers. With this technology evolving so fast, there can be negative impacts that Tesla may run into. The main problem is that the technology that is developed today will most likely be obsolete soon. For example, the charging cables being used to give electricity to the vehicles will change to better ones and not allowing current Tesla users to continue driving their vehicles. The chargers being created in the future will eventually not be backward compatible with older Tesla models, thus enforcing planned obsolescence when Tesla no longer decides to support their older vehicles.
Legal Troubles
As of recently, Elon Musk has been known for legal troubles, which date back to August of 2018. Many of these are because of the laws and protocols the Securities and Exchange Commission (SEC) has in place about disclosure. Musk posted a tweet about Tesla that violated settlement agreements that public companies need to follow. Elon Musk’s strong influence within the company as a spokesperson had allowed him to cause this havoc. Specifically, Elon musk had expressed an idea in “taking Tesla private”, and claimed that funding for the plan was secured, in a public Tweet, along with several more follow-up Tweets on the matter. The SEC filed a lawsuit alleging that Musk had misled the investors on the security of the funding and that the messages being conveyed to the investors were false and reckless. Musk was able to keep Tesla in the settlement. However, his title as board Chairman was stripped, and he and Tesla were both fined $20 million.
Later, after another tweet from Musk, the SEC once again came after him. They asked a federal judge to hold Elon Musk in contempt for violating the court settlement on tweets about the company. Musk’s tweet said, “Tesla made 0 cars in 2011, but will make around 500k in 2019.” The SEC was outraged by this false and inaccurate information. Musk tweeted hours later that he meant to say “annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for the year still estimated to be about 400k.” The SEC argued that Musk did not have his first tweet “checked and approved” before it was sent out to his over 20 million followers, as he was acting as the spokesperson of the company.
To sum up the situation, Elon Musk should not have been allowed to tweet matters on his company without it being approved first. He provided significant amounts of false information on his public Twitter account and to his many Twitter followers as well, which includes a lot of Tesla’s investors and caused much concern.
Communication by Tesla
Elon Musk’s Tweet about taking Tesla private at four hundred and twenty dollars a share would make the price of the company over seventy billion dollars. Soon after the tweet, the price of Tesla’s stock went up from three hundred and fifty-five dollars to three hundred and seventy dollars just moments after the tweet was published (Holt, 2018). When Elon Musk was asked about the tweet of Tesla going private, he confirmed that he was seriously looking to make Tesla a private company compared to a public company; It was and still is a public company. The tweet also needed a confirmation due to Elon Musk’s April fool’s tweet stating that Tesla was going bankrupt.
Within a timeframe of a couple of weeks from August 7th to the 23rd, the price of Tesla’s shares dropped by twenty-one dollars and two cents (Ferris, 2018). While Tesla stock shares have always fluctuated, this was a dramatic loss of company value that affected its investors and could have been prevented with better communication efforts. In 2018, Tesla’s stock was very volatile and
Legal Conflicts
Because normally social media can be viewed as a speech delivery, any content being discussed on the platform on United States soil would be covered by the First Amendment of the US Constitution (U.S. Const. amend. I). Even if the platform has terms and policies in place on how it can be used, anything being said on closed social media platforms such as Twitter would also be covered by the Constitution from a legal standpoint. However, what Elon Musk tweeted on August 7th, 2018, does not apply under what would be defined as violations of free speech, as the First Amendment only applies when the freedom of others is not violated. When there are public businesses with investors, while not only do they have their own rules applied to operations of communication, their investors’ freedom must not be violated either. When investors buy stock in a company, they can expect certain rules to be followed, including the proper verification and communication of information that is deemed factual. Misinformation and fraudulent activity cause the stock market to fluctuate negatively. While Elon Musk can tweet for his own merits under the First Amendment, when he is representing Tesla and providing misinformation, declaring privatization of the company can be considered a violation of the freedom of the choices of the investors as it creates preventable disruption in the free market, and thus the First Amendment would not apply to the scenario, other than to the investors.
The SEC regulations that applied to this incident were how Elon Musk publicized the information. Thus, the SEC issued a complaint that he didn’t know the certainty of the transactions in place, or openly discuss the deal terms and price that would be applicable when privatizing the company, his statement had no basis of fact and therefore was misleading to the investors (Securities and Exchange Comm. v. Musk, 2018). The SEC’s complaint also included that since Elon Musk’s twitter account was deemed to the stock market as a platform for announcements by Tesla since Tesla didn’t control the disclosure or procedures in place, there was no real way to determine the validity or completeness of the relevant announcements.
In turn, the settlements between Elon Musk, Tesla and the SEC were determined that Elon Musk needed to step down as Chairman and be replaced and couldn’t be re-elected as Chairman of Tesla for three years. (U.S. Securities and Exchange Commission, 2018) Tesla would also need to expand their boards and committees to oversee how the communications of the company. There was also a large fine of forty-million dollars to be distributed to harmed investors, half from Tesla and half from Elon Musk himself.
Communication Efforts
Within the settlement between Elon Musk, Tesla, and the Securities and Exchange Commission, Tesla and Musk agreed that Elon’s future tweets and communications would be monitored and pre-approved by Tesla to prevent future incidents of this kind. Despite this, Musk went on to insult the Securities and Exchange Commission as early as October 4th and he continued to mock the SEC in his tweets. For Tesla to settle the chaos that Musk has created, the company’s press has discussed his privatization of Tesla tweet in further detail. Not only that, but a copy of the email Elon Musk had sent to all his employees has been posted along with future communications with him. The Tesla Board Directors replaced Elon Musk with Robyn Denholm as chairman of Tesla in compliance with the settlement with the SEC.
Lessons to be Learned
This incident could have been prevented by having public statements about the company to be screened and checked before being posted by an official designated spokesperson. These screenings would have included checking for anything drastic or dramatic when related to the company’s financial assets, status, or worth. Because of how quickly social media content can reach a large audience even before it hits traditional news media, it is essential to be cautious when discussing these sorts of topics. Because there are laws and regulations in place for public companies and how they communicate actions such as becoming private entities, it is essential that messaging is compliant, whether by social media or press release, to prevent drastic stock changes that affect and harm investors.
Tesla and other companies should be encouraged to be strict on their public communication policies to prevent future instances like this one. Reckless communication by an unofficial spokesperson on behalf of a company is not at all recommended and it could potentially be unlawful. Public appearance and reputation of a company is often derived by how they communicate
Social media has many benefits, but not only with big companies, but smaller startups and just individuals can learn from this incident. Don’t post what you don’t want your employers to see. Not only that but just in general, be conscientious about what you post online. When something is uploaded on the internet, it is generally archived there forever. This doesn’t apply to only Twitter, but other social media platforms such as Facebook, Instagram, and Reddit as well. Another lesson that could be learned from this situation is to not post what you do not know or just stay away from online controversial discussions in general. Although Elon Musk may have had some understanding of what he was doing and saying, nothing was confirmed. If he were to have abstained from posting his taking Tesla private tweet, he could have avoided fines, saved so much time, and wouldn’t have had to deal with upset and confused investors.
References
Holt, K. (2018, August 7). Elon Musk made Tesla stock spike with hint the company will go private. Retrieved from https://www.engadget.com/2018/08/07/elon-musk-tesla-stock-420/
Howell, E. (2019, August 20). Elon Musk: Private Space Entrepreneur. Retrieved from https://www.space.com/18849-elon-musk.html
Kissinger, D. (2019, February 19). Tesla, Inc. PESTEL/PESTLE Analysis & Recommendations. Retrieved from http://panmore.com/tesla-motors-inc-pestel-pestle-analysis-recommendations
Siddiqui, F. (2019, April 26). Elon Musk and the SEC resolve dispute over the Tesla CEO’s tweets. Retrieved from https://www.washingtonpost.com/technology/2019/04/26/elon-musk-sec-resolve-dispute-over-teslas-ceos-tweets/?noredirect=on
Blankenship, M. (2018, October 24). Securities Fraud or Elon being Elon? The Forty Million Dollar Tweet. Retrieved from http://www.kentuckylawjournal.org/index.php/2018/10/25/securities-fraud-or-elon-being-elon-the-forty-million-dollar-tweet/
(2019, August 21). Elon Musk. Retrieved from https://www.biography.com/business-figure/elon-musk
Paul, K. (2019, July 25). Tesla shares tumble amid $408m loss and another high-profile departure. Retrieved from https://www.theguardian.com/technology/2019/jul/24/tesla-elon-musk-earnings-report-shares-loss
Reuters. (2019, August 20). Walmart sues Tesla over solar panels it says caused multiple fires. Retrieved from https://www.theguardian.com/business/2019/aug/20/walmart-tesla-lawsuit-solar-panels-fires
Reuters. (2019, April 26). Tesla’s Elon Musk reaches deal with SEC over Twitter use. Retrieved from https://www.theguardian.com/technology/2019/apr/26/tesla-elon-musk-sec-twitter-deal
Wu, A. (2019, June 25). Tesla’s Got the Keys: A History of Its Success. Retrieved from https://www.investopedia.com/articles/personal-finance/061915/story-behind-teslas-success.asp
Sandler, R. (2019, August 27). Amazon Is The Second Company To Report Tesla Solar Panel Fire. Retrieved from https://forbes.com/sites/rachelsandler/2019/08/26/amazon-also-experienced-tesla-solar-panel-roof-fire
de Haas, B. (2019, August 23). David Einhorn: Elon Musk Should Step Down. Retrieved from https://www.gurufocus.com/news/934792/david-einhorn-elon-musk-should-step-down/r/caf6fe0e0db70d936033da5461e60141
Van Boris, B., Robinson, M., Bain, B., & Hull, D. (2019, February 25). Elon Musk Faces U.S. Contempt Claim for Violating SEC Accord. Retrieved from https://www.bloomberg.com/news/articles/2019-02-25/elon-musk-faces-u-s-contempt-claim-for-violating-sec-accord
Eisler, M. N. (2016). A Tesla in every garage? IEEE Spectrum, 53(2), 34-55.
Neate, R. (2019, February 26). Elon Musk could face contempt charge over ‘inaccurate’ Tesla tweet. Retrieved from https://www.theguardian.com/technology/2019/feb/25/elon-musk-tesla-judge-contempt-sec
Boudette, N. E. (2018, October 2). Unraveling a Tesla Mystery: Lots (and Lots) of Parked Cars. Retrieved from https://www.nytimes.com/2018/10/01/business/tesla-cars-questions.html
Hull, D., & May, P. (2016, August 12). 2014: Rocket Man: The otherworldly ambitions of Elon Musk. Retrieved from https://www.mercurynews.com/2014/04/10/2014-rocket-man-the-otherworldly-ambitions-of-elon-musk
Tech, R. C. (2018, March 29). Tesla: A Changing World. Retrieved from https://seekingalpha.com/article/4159888-tesla-changing-world
Smith, D. (2019, August 16). Tesla sells more than just cars. Here are some of the company’s surprising ‘lifestyle’ products, from wireless chargers to surfboards. Retrieved from https://www.businessinsider.com/tesla-lifestyle-products-2018-8#the-limited-number-of-tesla-surfboards-sold-out-quickly-and-some-were-soon-available-on-ebay-for-up-more-than-twice-the-price-5
Elon Musk Settles SEC Fraud Charges; Tesla Charged With and Resolves Securities Law Charge. (2018, September 29). Retrieved November 21, 2019, from https://www.investor.gov/additional-resources/news-alerts/press-releases/elon-musk-settles-sec-fraud-charges-tesla-charged.
U.S. Const. amend. I.
Ferris. (2018, October 5). Tesla is down 7% thanks to Elon Musk’s tweets – he’s all but wiped out the gains Tesla got for settling with the SEC. Retrieved from https://www.cnbc.com/2018/10/05/tesla-shares-drop-nearly-5percent-after-musk-mocks-sec-on-twitter.html.
Security Exchange Comm. v. Musk [2018]1:18-cv-08865-AJN (Southern District Court of New York).
Gelles, D. (2018, August 25). Why Elon Musk Reversed Course on Taking Tesla Private. Retrieved from https://www.nytimes.com/2018/08/25/business/elon-musk-tesla-private.html.
http://panmore.com/tesla-motors-inc-organizational-culture-characteristics-analysis Tesla’s Corp. Culture goals
https://www.investor.gov/additional-resources/news-alerts/press-releases/elon-musk-settles-sec-fraud-charges-tesla-charged Summary and Source for basic SEC case details
https://www.npr.org/2019/02/25/698008458/sec-says-tesla-chief-elon-musks-tweets-violated-court-settlement Musk’s Violation of Settlement
Sec settlement: https://www.sec.gov/news/press-release/2018-226
Tesla Blog Post
https://www.tesla.com/blog/taking-tesla-private
https://www.tesla.com/blog/update-taking-tesla-private
https://www.tesla.com/blog/staying-public
possibly relevant post-crisis: https://www.tesla.com/blog/announcing-robyn-denholm