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Tesla without Musk at the wheel? It’s what the SEC now wants

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DETROIT — Tesla without Elon Musk at the wheel? To many of the electric car maker’s customers and investors that would be unthinkable. But that’s what government securities regulators now want to see.

The Securities and Exchange Commission has asked a federal court to oust Musk as Tesla’s chairman and CEO, alleging he committed securities fraud with false statements about plans to take the company private.

The agency says in a complaint filed Thursday that Musk falsely claimed in an Aug. 7 statement on Twitter that funding had been secured for Tesla Inc. to go private at $420 per share, a substantial premium over the stock price at the time.

An SEC press release says the agency asked the U.S. District Court in Manhattan for a “bar prohibiting Musk from serving as an officer or director of a public company.” It also is asking for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties.

Ousting Musk, who has a huge celebrity status with more than 22 million Twitter followers, would be difficult and could damage the company. He’s viewed by many shareholders as the leader and brains behind Tesla’s electric car and solar panel operations.

The stock market shuddered at the prospect. At the opening bell Friday, shares slid 10 percent.

“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” Steven Peikin, co-director of the SEC’s Enforcement Division, said in a statement. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”

Musk, in a statement issued by Tesla, called the SEC action unjustified.

“I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way,” the statement said.

The complaint alleges that Musk’s tweet harmed investors who bought Tesla stock after the tweet but before accurate information about the funding was made public.

Peter Henning, a law professor at Wayne State University and a former SEC lawyer, said it’s the first fraud case involving use of social media by the CEO of a public company. Musk and Tesla didn’t fully disclose details of the plan in the Aug. 7 tweet or in later communications that day as required, he noted.

“You can’t make full disclosure in 280 characters,” he said, referring to the length limit of a tweet.

Joseph Grundfest, a professor at Stanford Law School and former SEC commissioner, said Musk will likely want to settle before trial so that he could conceivably stay on as CEO, with some constraints such as prohibiting him from making public statements without supervision. But Musk also could agree to step down as CEO and instead take another title, such as chief production officer.

The Wall Street Journal, citing people familiar with the matter, reported that Musk had been close to settling with the SEC but that he and his lawyers decided at the last minute to fight the case. Tesla did not respond to a request for comment on the report.

Grundfest also said that the challenge for the SEC is to “appropriately discipline Musk while not harming Telsa’s shareholders.”

According to the complaint, Musk met with representatives of a sovereign investment fund for 30 to 45 minutes on July 31 at Tesla’s Fremont, California, factory. Tesla has identified the fund as Saudi Arabia’s Public Investment Fund, which owns almost 5 percent of the company.

Fund representatives expressed interest in taking Tesla private and asked about building a factory in the Middle East, Musk told the SEC. But at the meeting, there was no discussion of a dollar amount or ownership stake for the fund, nor was there discussion of a premium to be paid to Tesla shareholders, the complaint said. Musk told the SEC that the lead representative of the fund told him he would be fine with reasonable terms for a go-private deal.

“Musk acknowledged that no specific deal terms had been established at the meeting and there was no discussion of what would or would not be considered reasonable. Nothing was exchanged in writing,” the complaint stated.

The SEC alleged in the 23-page complaint that Musk made the statements using his mobile phone in the middle of a trading day. That day, Tesla shares closed up 11 percent from the previous day. Musk has said that he posted the go-private tweet while driving to the airport and that no one reviewed it.

The statements, the complaint said “were premised on a long series of baseless assumptions and were contrary to facts that Musk knew.” Later in the month, Tesla announced that the go-private plan had been scrapped.

In its complaint, the SEC said that Musk’s statements hurt short sellers, investors who borrow a company’s stock betting that it will fall. Then they buy the shares back at a lower price and return them to the lenders, pocketing the profit.

In August, more than $13 billion worth of Tesla shares were being “shorted” by investors, the complaint said, as the stock was under pressure due to questions about Tesla’s finances and Musk’s erratic behavior.

Mark Spiegel, a short-seller and constant Musk critic, applauded the SEC for pursuing what he predicted would be easy for the government to prove.

Spiegel also echoed the concerns of corporate governance experts who have lambasted Tesla’s board for being too beholden to a CEO that they are supposed to oversee.

“They should have fired him a long time ago. Will they now? I don’t know,” Spiegel said.

There was no indication of that in a joint statement issued late Thursday by the company and its board.

“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company,” the statement said.

 

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ATA Truck Tonnage Index surges 6.6% in July, 7.3% higher than July 2018

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Compared with July 2018, the SA index surged 7.3%, the largest year-over-year gain since April. (Courtesy: AMERICAN TRUCKING ASSOCIATIONS

ARLINGTON, Va. — American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 6.6% in July after falling 1.2% in June. In July, the index equaled 122.7 (2015=100) compared with 115.1 in June.

“Tonnage in 2019 has been on a rollercoaster ride, plagued with large monthly swings, which continued in July as tonnage surged after falling significantly in May and June,” said ATA Chief Economist Bob Costello. “However, take out the month-to-month noise, and you see that truck tonnage is still on a nice upward path. It is important to note that ATA’s tonnage data is dominated by contract freight, which is performing significantly better than the plunge in spot market freight this year.”

June’s reading was revised down compared with our July press release.

Compared with July 2018, the SA index surged 7.3%, the largest year-over-year gain since April.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 122.8 in July, 4.5% above June level (117.5). In calculating the index, 100 represents 2015.

Trucking serves as a barometer of the U.S. economy, representing 70.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.77 billion tons of freight in 2017. Motor carriers collected $700.1 billion, or 79.3% of total revenue earned by all transport modes.

ATA calculates the tonnage index based on surveys from its membership and has been doing so since the 1970s. This is a preliminary figure and subject to change in the final report issued around the 5th day of each month. The report includes month-to-month and year-over-year results, relevant economic comparisons, and key financial indicators.

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Average price of gallon of diesel drops below $3 for first time since February

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WASHINGTON — The average on-highway price of a gallon of diesel declined 1.7 cents a gallon to $2.994 for the week ending August 19, according to the Energy Information Administration of the Department of Energy.

It marked the first time since the week ending February 11, 2019, that the price has been below $3, and it marked the sixth consecutive week of a decline.

All regions of the country showed a drop led by a 2.5 cent a gallon decline in the New England states (Maine, Vermont, New Hampshire, Massachusetts, Connecticut and Rhode Island) and a 2.4 cent a gallon drop in the Midwest states (North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Missouri, Iowa, Minnesota, Wisconsin, Illinois, Tennessee, Kentucky, Indiana, Ohio and Michigan). California declined 2.2 cents a gallon.

The price for the week ending August 19 was 21.3 cents a gallon for the comparable week in 2018.

For a complete list of prices by region for the past three weeks, click here.

For a list of the states by region, click here.

https://www.eia.gov/petroleum/gasdiesel/diesel_map.php

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July trailer sales up slightly, but below last year; used Class 8 sales fall again

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Both ACT Research and FTR reported trailer sales in July as being up slightly over June, but still far below the same month one year ago. (Courtesy: GREAT DANE)

The nation’s two organizations that track and analyze data about the commercial motor vehicle market both note that trailer orders were up in July as compared to June but were still far below when compared with the same month last year.

One of the two organizations reported used Class 8 sales fell for the fourth consecutive month.

ACT Research said preliminary estimate for July 2019 net trailer orders is 9,900 units. Final volume will be available later this month. This preliminary market estimate should be within +/- 3% of the final order tally.

FTR reported preliminary trailer orders for July at 9,000 units, up 61% from dismal June numbers but 68% below July 2018. FTR said trailer orders continue to show weakness during the summer months after experiencing a record run in the second half of last year, noting that van fleets already have their orders in for 2019 and have not started ordering yet for 2020. Although currently, production remains robust at near-record levels, some easing of build rates is expected as backlogs fall significantly to where they were at the start of 2018, FTR said. Trailer orders for the past 12 months now total 324,000 units.

“While net trailer order volume improved significantly from June’s dramatically disappointing results, the industry’s year-over-year performance continued to be extremely weak. While net orders jumped 65% versus an amazingly weak June, they were 66%  below this point last year, a tough comparison to the first month of the record-setting order run-up of last summer and fall,” said Frank Maly, ACT’s director of CV transportation analysis and research. “While some fleets made investment commitments in response to the opening of some 2020 order boards, their overall response was lackluster. A few months ago, there was strong interest to push commitments into next year, but uncertainty over the economy, freight volumes, and capacity has now caused many fleets to move to the sidelines as they re-assess their true needs for either replacement of older equipment or additions to fleet capacity next year.”

On a positive note, Maly said the cancellation pressures of recent months appeared to ease a bit in July. However, any cancels are likely impacting fourth quarter production slots, so there is still some churn in order board occurring before year-end.

“That results in a fairly soft foundation for early next year. Also worth noting is that production continued at a solid pace in July, although OEMs definitely slid back from June’s frantic pace,” he said.

Don Ake, FTR vice president of commercial vehicles, said trailer orders should stay subdued in August but start to revive in September, as fleets determine their needs for next year. The environment remains uncertain, with freight growth slowing and the tariff situation in flux.

“The July order volumes continue to demonstrate a possible return to normalcy in the equipment markets. The low total is representative of a typical slow summer order month, and is very close to the July 2016 number,” he said.

As for the used truck market, Steve Tam, ACT’s vice president of research, said preliminary used truck sales fell 2% month-over-month, the fourth consecutive sequential drop.

Other data released in ACT’s preliminary report included sequential comparisons for July 2019, which showed that average prices fell 4%, while average miles climbed 2%, and average age was up 4%.

“Used truck prices are the hottest topic in the industry right now,” Tam said. “Many dealers are experiencing significant softening in prices, but the erosion is not uniform. Depending on a host of factors, experiences vary and a few factors that impact prices include customer, equipment specifications, location, and vehicle condition.”

ACT’s Classes 3-8 Used Truck Report provides data on the average selling price, miles, and age based on a sample of industry data. In addition, the report provides the average selling price for top-selling Class 8 models for each of the major truck OEMs – Freightliner (Daimler); Kenworth and Peterbilt (Paccar); International (Navistar); and Volvo and Mack (Volvo).

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