The Houston Astros are in the doldrums of a nine-game home losing streak. However one team which is not only going the other way but is chasing the Astros is the Oakland Athletics. The original purveyors of data analytics in baseball, as chronicled by Michael Lewis in Moneyball, the team did not use data analytics in the manner that the Astros did for player development but went in a different direction. As reported by Jared Diamond, writing in a Wall Street Journal (WSJ) article entitled “Moneyball, 2018 Edition”, the A’s essentially took what are the top analytical insights currently in baseball vogue and built their team around these insights. It includes hitting more fly balls and home runs to avoid the defensive innovations such as the shift, beefing up the bullpen at the expense of starting pitching and bringing it batters who hit with power. It might be called incorporating best practices into your baseball team.
One company that does seem to have a clue about what are best practices right now is Tesla and more particularly, its founder and Chief Executive Officer (CEO) Elon Musk. Channeling his inner Rogers and Hammerstein, Holman W. Jenkins, Jr. writing in the WSJ, asked “How to Solve a Problem Like Elon?”This refers to the most recent public outburst on Twitter, the now infamous tweet that he was considering taking Tesla private at $420 per share and that he had “funding secured.” Did Musk intend to deceive the market? Was he aiming at short-sellers who are trying to make money on the failures of his company? Was he trying to create artificial bump in the stock price? These are all questions that must be sorted out by the Securities and Exchange Commission (SEC).
At this point, the primary question is whether the “funding secured” was a true statement. As for the Tesla Board of Directors (who were collectively blissfully unaware of this plan), since that tweet have managed to form a Board special committee to consider such a strategy. According to reports, the Board remains blissfully unaware of any such deal nor has it reached any conclusions of whether such a deal would be advisable or even feasible. Musk himself has belatedly hired business advisors to help the process along. The question for the SEC is if all this activity after the fact Musk and the company simply trying to clean up the mess it found itself in based upon the tweet.
What has been the response of the Board at this point? Andrew Ross Sorkin and others, writing in a New York Times (NYT) DealBook article entitled “Board Tries to Rein in Tesla’s Chief After Tweets”,said, “Members of Tesla’s board are scrambling to control a chief executive some directors think is out of control.” The Directors “were upset that Mr. Musk’s tweets forced them to rush out a public statement explaining a transaction that was at an embryonic stage, according to people familiar with the thinking of board members. Multiple directors have recently told Mr. Musk that he should stop using Twitter, with one urging him to stick to building cars and launching rockets, according to people familiar with the board’s communications. Tesla employees, including the company’s public-relations staff, have echoed that point, another person said.”
Sorkin noted, “Some members of the board have grown alarmed by what they see as Mr. Musk’s erratic behavior, according to three people familiar with some directors’ thinking. Directors were blindsided last week when Mr. Musk claimed on Twitter that he had “funding secured” for a possible deal to convert Tesla from a publicly traded company into a private one.” Just how bad is it at the Tesla Board about now? It is so dire that Tesla’s two outside directors have hired not one but two law firms to represent them personally.
Musk himself has assured investors that not only does he know what he is doing but that he has “funding secured” based upon meetings he held with Saudi Arabia’s main government investment fund. Further appearing as if he was filling in the details of process to actually go private, this past Monday Musk posted yet another tweet that “he is “excited to work with Silver Lake and Goldman Sachs” as financial advisers on his proposal to privatize Tesla.” But the problems is that “neither Goldman nor Silver Lake — a private-equity firm focused on technology investments — had actually signed on with Tesla or Mr. Musk to play those roles, according to people familiar with the matter.” Then “on Tuesday, Goldman was in talks with Tesla about a possible role, but had not finalized anything. Silver Lake, meanwhile, is interested in investing in any going-private deal, but it isn’t acting in a paid advisory capacity.”
At some point, the Board will have to actually govern. Yet Jenkins worries that the SEC will not sanction Musk for his actions. He was quite brutal in ending his piece, “First answer: Today’s SEC commissioners and chairman will pray that it happens after they are gone. Second answer: In a fact of life that irritates many readers when I mention it, if you’re an ordinary scofflaw, you can pretty much expect the law to be administered as written. If you are Hillary Clinton or Elon Musk or anybody from whom large political ripples flow, the law is always going to treat you differently.”
It was reported this morning by the Wall Street Journal that the SEC had issued a subpoena to Tesla, seeking “information from each of Tesla’s directors, according to a person familiar with the matter.”
At some point, the Tesla Board of directors will have to actually govern. For its sake, I hope it is sooner rather than later.Click to tweet
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© Thomas R. Fox, 2018