Musk Crosses The Line Again
This is a guest post by permission from the Credit Strategist March 1 issue.
Tesla's February 28th conference call to announce it is closing all of its retail stores and launching a $35,000 version of its Model 3 was another failed attempt by Elon Musk to create excitement around his flailing company. At this point, however, the story at Tesla is shifting away from its business problems to its rising legal risks. Last week, the company's General Counsel, Dane Butswinkas, resigned on the morning after Elon Musk published and then retracted a tweet filled with false information about Tesla's production numbers. At that time, however, Mr. Butswinkas announced that he would continue to represent the company at his Williams & Connolly. That didn't last long, however, as Williams & Connolly resigned last night as well. No reason was given, but it may have something to do with the firm's discomfort with representing a client that seems intent on violating the securities laws because Tesla was at it again last night.
Not content to try to make a proper public announcement after market hours last night, Tesla in its infinite wisdom decided to conduct a highly unusual conference call for select members of the media and investment community. Such a call is improper because it provides selective disclosure of material information to a favored group of people who can then invest based on what they learn. Those invited to the call were asked not to publish the recording or transcript of the call and were asked not to forward or share the call-in number in a blatant effort by the company to restrict the information discussed. To my knowledge, this conduct violates the securities laws on fair disclosure.