Problems mount a Tesla, and there is nobody better than Dave Kranzler to break-it down and figure out what it means. Here are the details…
Phil Rothenberg, VP of Legal at Tesla, is leaving the company. He’s been at Tesla for nearly 8 years; previously worked at the SEC. I assume Phil has a lot of stock and a lot of stock options, having been at the Company for eight years, including a nice chunk of options he’s leaving on the table because they will never vest. If everything at the Company was as amazing as presented by Musk and his meat-puppet CFO in the 3rd quarter earnings report, why leave now?
Apparently Phil, trained in securities law, would have been the designee of reviewing and monitoring Musk’s Tweets and other social media venues per the terms of the SEC settlement. Jonathan Chang, the other VP-level lawyer at TSLA, was not a trained securities lawyer. I have to believe that the potential legal liabilities connected to being legally responsible for overseeing the manner in which Musk operates as his own PR organization weighed heavily on Phil’s decision to flee Telsa’s corporate Sodom and Gomorrah.
Although the SEC, for whatever reason, let Musk and Tesla off the hook on a slam-dunk securities fraud case with a mere wrist-slap, the provisions of the settlement will likely create a sticky legal spider web that can be utilized to snare Musk and those around him at the Company on several counts down the road. I am certain a desire to legally disconnect from Tesla/Musk explains the sudden exodus of high-level executives in the past 12 months.
After Tesla’s post-earnings price spike, the torrid stock market run-up that started October 30th played a major role in keeping Tesla’s stock propped up over the last two weeks. At the beginning of the week after Tesla reported (Monday, October 29th) Tesla’s stock was about to sell-off. But the major stock market indices began to shoot up, keeping Tesla’s stock supported. Today’s action in Tesla stock reinforces this theory, as TSLA plunged 5.5% while the SPX dropped just under 2%. Tesla’s stock is going lower – a lot lower.
Tesla will eventually implode – all Ponzi schemes fail. But Musk has proven to be adept at kicking the can down the road. In the analysis I did of Tesla’s Q3 10-Q that I presented to my Short Seller’s Journal on Sunday evening, I didn’t drill down into the 10Q as thoroughly as I could have because of lack of time. But I’ve never seen this degree of manipulation in the numbers from a company the size and profile of Tesla. Bernie Madoff’s company was private so there were never publicly available numbers to scrutinize. Tesla’s operations will eventually collapse under the weight of liabilities and a collapse in auto sales related to the economy and competition.