Musk Says Tesla Close to Profitability, Former SEC Official Calls Musk "Numbnut"


The SEC settled with Elon Musk on Saturday. Many questions remain. Profitability moves to the forefront.

Elon Musk settled a SEC lawsuit on Saturday after Musk walked away from a better deal on Friday.

"It is not clear why Mr. Musk changed his mind so quickly," said the New York Times.

I speculate the Tesla board demanded Musk settle.

Regardless, Musk got off lightly given the SEC filed fraud charges and threatened to bar Musk from being a CEO of a public company ever again.

The terms of the settlement are slightly tougher than those that two people briefed on the talks said Mr. Musk had rejected on Thursday, which called for a two-year bar on serving as chairman and a $10 million fine. [It's now $20 million].

Tesla, which is also settling with the S.E.C., will pay a $20 million penalty. The company was not charged with any fraud.

In addition, the company will add two independent directors and take steps to monitor Mr. Musk’s communications with investors. It will also create a permanent committee of independent directors to monitor disclosures and potential conflicts of interest.

Jay Clayton, the S.E.C. chairman, said the settlement with Mr. Musk and Tesla sent a message that “when companies and corporate insiders make statements, they must act responsibly, including endeavoring to ensure the statements are not false or misleading.”

In settling, Mr. Musk neither admitted nor denied misleading investors under the civil fraud charge, which means he cannot later say he did nothing wrong.

Ammunition for Lawsuits

Because Musk cannot deny he did anything wrong, Tesla's SEC Deal Provides Ammunition for U.S. Probe, Investor Lawsuits.

Tesla Inc’s settlement with U.S. regulators will help soothe investors calling for more oversight of Chief Executive Elon Musk, experts said, even as it gives ammunition to short-sellers pursing separate cases and to a probe by the Justice Department.

“The real worry for the company is not the SEC but private actions that follow a settlement like this,” said Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “By paying that size fine, it bolsters investors’” claims over stock market losses, he said.

Bit of a Numbnut

A former SEC commissioner says Elon Musk is ‘a Little Bit of a Numbnut’

“ Musk might be a genius when it come to electric cars and space travel, but he’s a little bit of a numbnut when it comes to dealing with the SEC.”

Those are the words of Stanford Law School professor and former SEC commissioner Joseph Grundfest, in an interview Saturday with the San Jose Mercury News.

Grundfest told the newspaper that Saturday’s settlement of the SEC fraud investigation — in which Tesla Inc.’s chief executive agreed to give up his chairmanship and he and the company would pay $40 million in penalties, while not admitting guilt — is a good thing, especially a stipulation that Tesla must monitor the tweet-happy Musk’s communications.

“He won’t be able to tweet unless he runs it by a sober, responsible adult,” Grundfest told the Mercury News, “and that’s a good thing for Elon and the world.”

Entertainment Value Decreases

If someone monitors his Tweets, the public loses free entertainment. Damn.

"Very Close" to Profitability

In a Weekend Email, Musk told employees Tesla ‘Very Close’ to Profitability.

“We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well tomorrow (Sunday),” Musk wrote in the email to staff. “If we go all out tomorrow, we will achieve an epic victory beyond all expectations.”

Sunday is the last day of the third quarter. We may see production numbers on Monday. Musk said Tesla would produce between 50,000 and 55,000 Model 3s this quarter.

Tesla managed a profitable quarter once before. It didn't last long.

Questions Abound

Musk also said it would take 6,000 a week to hit profitability. Let's call it 5,000. Even at that lower rate, Tesla would need to produce 65,000 cars a quarter.

Are there 65,000 buyers a quarter with all these problems?

And speaking of problems what about money lost on warranties?

It will be interesting to see where Tesla sweeps repairs given that so many people report they are waiting for weeks to get parts.

If Tesla can produce cars, how can it not produce parts?

Monday Reaction

The settlement has to be good news vs. what took place on Friday. I have no expectation, but little would surprise me, either direction.

I will offer this. If the reaction is "gap and crap", look out below.

Mike "Mish" Shedlock

Comments (7)
No. 1-7

"Numbnut"? That term only carries weight when it is thrown at you by a USMC Gunnery Sgt. - not some pointy-headed geek named Grundfest.


The SEC gets to pocket $40m and everyone pretends Musk isn't in charge for a few years. Reminds me of the deal Pablo Escobar made with Columbian Gov't when he was "imprisoned".


Have they begun building the cheaper cars yet? Or are they still getting through the backlog of higher-optioned models?


From the SEC's web site: "The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public's trust." Yes, reality they have consistently acted more like Benjamin Graham's short-term voting machine than his long-term weighing machine in their enforcement actions. When they might have made a difference by weighing, (auditing) and didn't:1.Enron, 1999 2.Madoff Scandal, 1999 and 3. Tesla...years ago. Tesla finally lost the vote of public opinion and the SEC acted. It's ironic it happened via twitter, the quintessential real-time voting machine.


WTF Mish?, I think you meant, but could not bring yourself to say, that in SEC settlement Musk did not admit to "misleading investors under the civil fraud charge" which means he CAN later say he did nothing wrong. Please reread this non-sensensical article conclusion and clarify.

Shorties should thank god they do not need to answer to the SEC for their FUD that is a directed campaign at "misleading investors". What a joke!

Mish, regarding options, you are making a time sensitive bet, and decided not to take profit now on two separate occasions of negative headline news. Perhaps the position is token click bait BS? What percentage of your position is short TSLA? Inform your readers or shut up about it!

Mish Logic??:

"In settling, Mr. Musk neither admitted nor denied misleading investors under the civil fraud charge, which means he cannot later say he did nothing wrong" ???? Huh ????

Mike Mish Shedlock
Mike Mish Shedlock


"In settling, Mr. Musk neither admitted nor denied misleading investors under the civil fraud charge, which means he cannot later say he did nothing wrong"

I have seen that written that way in many places. And in context, that is what the article sated as well.

I believe it is correct as written. Musk cannot claim he did no wrong.

Mike Mish Shedlock
Mike Mish Shedlock


BTW - Gilkderdude - One more accusation by you and you are banned. Strike that. I have had enough now.

Global Economics