They are old enemies.
Two enemies who like to fight each other.
Elon Musk and Senator Elizabeth Warren never miss an opportunity to attack each other. This time, it was the former candidate for the Democratic primary in 2020 who shot first, taking advantage of Musk’s setbacks.
On December 18, she wrote to the Board of Directors of Tesla (TSLA) – Get Free Report, accusing Musk of conflict of interest, and possible misappropriation of the electric vehicle maker’s assets, relating to the acquisition of Twitter for $44 billion by the billionaire.
“I am writing regarding concerns that Tesla’s Board of Directors has failed to meet this legal duty with regard to the actions of Tesla’s Chief Executive Officer, Elon Musk, in the aftermath of his purchase of Twitter,” Sen. Warren (D-Massachusetts) wrote.
“I have a series of questions about how the Tesla Board is dealing with conflicts of interest, misappropriation of corporate assets, and other actions by Mr. Musk that appear not to be in the best interests of Tesla and its shareholders, so that I can assess whether current law is adequate in circumstances such as these,” she continued.
‘Your Legal Responsibility’
She first wanted to remind the board that its duty and its role are not to protect Musk, the CEO, but the shareholders.
“Your legal responsibility is – as Tesla’s own public commitments state — ‘to serve as a prudent fiduciary for shareholders and to oversee the management of [Tesla’s] business,’ Warren said. “That responsibility includes ensuring that Mr. Musk is an effective CEO and that he fulfills his legal obligation to act in the best interests of Tesla and all of its shareholders, not just himself.”
“The fact that Mr. Musk was, until recently, the world’s richest man does not absolve him of those legal responsibilities or provide assurances that he will meet them. The basic structure of Mr. Musk’s deal to buy Twitter, and his actions since becoming CEO, raise a number of concerns.”
The eight-page letter from Senator Warren, champion of the progressives, comes as a revolt by individual investors has emerged in recent days over their frustration at seeing Tesla’s stock continuing to fall in the stock market. Just before sending the letter, Tesla’s market value was only slightly over $474 billion, meaning that nearly $640 billion of market capitalization had evaporated in 12 months. Tesla’s stock was trading at $150.23, which represents a 57.4% year-on-year drop.
It has now dropped to $148.29 as of this writing.
For many retail investors, this stock market rout is largely because Musk abandoned Tesla to focus on Twitter, whose financing forced him to take on $13 billion in personal debt.
“Elon has now erased $600 bil of tesla wealth and still nothing from the Tesla BOD,” lambasted Ross Gerber, one of Tesla’s most vocal shareholder on December 16 on Twitter. “It’s wholly unacceptable.” BOD stands for Board of Directors.
On December 19, Gerber commented on a post from Senator Warren which lambasted the Tesla board.
“Wake up Tesla BOD! $TSLA,” the investor wrote.
Conflict of Interest
In her letter, the senator questions the fact that Tesla employees were brought in to work for Twitter and does not seem to accept Musk’s explanation that it was on a voluntary basis.
Nearly 50 Tesla employees, mostly software engineers from the Autopilot team, including Tesla’s Chief Information Officer, the Director of Software Development, the Director of Software Engineering, the Autopilot Project Manager, the Senior Manager of DevOps and a senior manager of security intelligence, went to Twitter’s headquarters in San Francisco.
“This use of Tesla employees raises obvious questions about whether Mr. Musk is appropriating resources from a publicly traded firm, Tesla, to benefit his own private company, Twitter,” Senator Warren said. “This, of course, would violate Mr. Musk’s legal duty of loyalty to Tesla and trigger questions about the Tesla Board’s responsibility to prevent such actions, and may also run afoul other ‘antitunneling’ rules that aim to prevent corporate insiders from extracting resources from their firms.”
She ended by asking twelve questions to the board on the measures put in place to avoid conflicts of interest.
“What specific guardrails and oversight has the Board put in place to ensure that Mr. Musk is meeting his fiduciary and management responsibilities at Tesla while also running operations at Twitter?” was one of the questions Senator Warren asked.
You can read the full letter here.
Musk’s response was quick. It was as scathing as his adversary’s letter.
“The United States has definitely been harmed by having her as a senator lol,” the billionaire responded on December 20.