For Elon Musk, Tesla’s CEO, recent weeks have been nothing short of tumultuous. His name has been plastered all over news articles and websites, and not for his bold business moves or catchy tweets as is usually the norm. The tribulations started when the Securities and Exchange Commission (SEC) pushed for a Court ruling for his violation of the terms of an agreed settlement dated October 16, 2018. According to the Court’s Final Judgment on the matter, Tesla would put in place mandatory procedures and controls overseeing its CEO’s communications concerning the Company in any format.
280 Characters Too Many
Twitter happens to be under the scope of “any format” and, therefore, Musk’s tweet stating that his company would make 500,000 cars this year was taken by SEC to be a violation of the court’s ruling. According to Musk’s lawyer, the tweet was not pre-approved by Tesla’s board members, as agreed in court. Now the supreme court has given Musk a notice to explain himself or be prepared to be held in contempt.
Though Tesla’s shares showed considerable growth even since the SEC’s push, trader Mike Khouw feels that the stock may fail to weather the storm that is gradually but surely brewing on the horizon. Speaking on Fast Money, a CNBC post-market show, admits that he is not surprised that the company’s shares registered a 6% growth in the immediate aftermath of the SEC affair, attributing the rise to the general publicity around the matter. However, going forward, he holds the opinion that the stock will register a fall of up to 10% within the next two weeks.
A Drop in Stock Value
Tesla has in recent times had a murky relationship with the SEC, with the federal agency being the main reason behind nosedives in the company’s stock. Back in September last year, Tesla investors had a rough day at the office when the company’s stock plummeted almost 14%, a direct cause of the SEC suing Musk for fraud.
Notable times where the company has been in an almost similar situation include Jan. 13, 2012 when there was a one-day drop of 19.3%, July 6, 2012 where the plummet was at 16.1%, and Dec. 27, 2010, 180 days after Tesla’s IPO bringing about the expiry of the lock-up period, and a subsequent dive to the tune of 15.1%. Nov. 6 and July 16, 2013, also fall into this category, registering nosedives of 14.5% and 14.3% respectively.
Elon Musk can, however, seek refuge in the fact that whenever his company’s stock has registered significant drops, the shares always bounce back almost immediately. For some investors, the volatility in Tesla’s stock is the exhilarating factor. The personality Musk exudes as a revolutionary in business is also another contributing factor driving investors to buy into his company. As is the general opinion in their circles, when you buy Tesla stock, you buy into Elon Musk.
