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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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May North American Class 8 orders take a tumble

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May Class 8 orders were down a significant 70% from year-ago May. (Courtesy: DAIMLER TRUCKS NORTH AMERICA)

Preliminary North America Class 8 net order data released by the two commercial vehicle organizations that track information both show a sharp decline in Class 8 orders for May.

FTR reports preliminary Class 8 orders for May scraped the bottom of the order cycle, coming it a lowly 10,400 units, or 29% below the slow April activity.

This is the lowest volume for Class 8 orders since July 2016 and the weakest month of May since 2009, reflecting a minus 71% year-over-year comparison. Class 8 orders for the past 12 months now total 360,000 units.

ACT Research showed the OEM industry booked 10,800 units in May, dropping 27% from April, but down a more significant 70% from year-ago May.

FTR’s Don Ake, vice president of commercial vehicles said May 2019 is basically the final period for ordering trucks to be built in 2019 and the low numbers indicate that fleets are simply trying to find any scarce build slots left for the year.  Backlogs should fall to the 220,000 range, just where they were a year ago when the fervent ordering for 2019 began.

“May’s low orders were consistent with it being the last month in this year’s cycle. The 2019 order pattern was pulled ahead by three months, so May’s orders are similar to what you normally would see in August,” he said. “Ordering for 2020 is expected to begin in June, with several OEMs expected to start taking orders for next year.”

OEM build rates remain at robust levels, Ake said.

“The economy and freight growth are expected to ease throughout the year, applying some downward pressure on the truck market in the second half.  Orders for the next couple of months should be a good indicator of fleet confidence about 2020.”

“Fraying freight market and rate conditions along with a still-large Class 8 order backlog contributed to the worst NA Class 8 net order performance since July 2016,” said Kenny Vieth, ACT’s president and senior analyst. “May saw NA Class 8 orders fall below the 15,900 units averaged through the year’s first trimester, and year-to-date Class 8 net orders have contracted 64% compared to the first five months of 2018.”

For more information on FTR visit .

For more information on ACT Research, visit .

 

 

 

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Average on-highway price of gallon of diesel drops 1.5 cents

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This week's price is 14.9 cents a gallon lower than the comparable week last year.

WASHINGTON — The average on-highway price of a gallon of diesel dropped 1.5 cents a gallon to $3.136 for the week ending June 3, according to the Energy Information Administration of the Department of Energy.

All told the price has dropped 3.5 cents during the past four weeks.

All regions of the country declined, led by California at 2.5 cents, followed by the total West Coast (Washington, Oregon, Nevada, Arizona and California) and 1.8 cents a gallon in both the Rocky Mountain states (Montana, Idaho, Wyoming, Utah and Colorado) and the Gulf Coast (New Mexico, Texas, Arkansas, Louisiana, Mississippi and Alabama).

This week’s price is 14.9 cents a gallon lower than the comparable week last year.

 

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FreightWaves acquires StakUp Inc., TCA inGauge’s software platform

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ALEXANDRIA, Va. and CHATTANOOGA, Tenn. — FreightWaves, a data and content source for the freight markets, has acquired StakUp Inc. as part of a multi-faceted partnership with the Truckload Carriers Association that will build on a previously per a data and marketing agreement established in November 2018.

StakUp is the developer of the “inGauge” online benchmarking platform used exclusively by the TCA Profitability Program (TPP) to compare and contrast financial and operational performance. As the exclusive software service provider for TPP, StakUp has built a significant database of carrier and brokerage profiles since its founding in April 2014 by then TCA Chairman Ray Haight and StakUp President Chris Henry.

As of June 1, Henry will have dual roles. He will continue as TPP Program Manager and also serve as FreightWaves’ vice president of carrier profitability. In this role, he will enhance the data and features offered through the FreightWaves SONAR freight intelligence platform, promoting SONAR features specifically for North American truckload carriers. Jack Porter will remain as TPP managing director, and will work closely with Henry to achieve growth targets, enhance group meeting content, and strategic direction.

This new partnership between TCA and FreightWaves further fuels TCA’s membership growth and enhances active participants in the TCA Profitability Program, according to TCA Chairman Josh Kaburick, who said the outlined goal is to increase TPP participants to 2,000 by the end of 2025. In addition to the value of a larger pool of participants, especially for the curation of best practices and new initiatives, TCA and FreightWaves will be emphasizing the importance of increased technological sophistication of member companies.

In addition, FreightWaves and TCA will conduct research to improve the efficiency and profitability of North American trucking companies and their related supply chain partners. Quarterly research objectives will be established to leverage FreightWaves’ growing datasets and its data scientists. TCA’s gvernment affairs team will work closely with FreightWaves staff to establish the research objectives.

Also, the two organizations have developed an incentive program, exclusively for TPP participants, to use the FreightWaves SONAR platform free for six months (limit of one SONAR seat per member, non-API access) that began June 1 and will end November 30. Carriers that join TPP after June 1, will receive access to SONAR beginning on their join date, and ending on November 30, 2019. Current TPP participants are strongly encouraged to activate their trial in order to maximize their evaluation period before the November 30 deadline.

“Having previously established a close working relationship with TCA, this acquisition and partnership was the logical extension to build on each other’s strengths,” said FreightWaves’ Founder and CEO Craig Fuller. “TCA has established the premier benchmarking and knowledge-sharing platform in trucking. Our goal is to add features, services and data to enhance the value for current and future TPP participants. If you are a truckload carrier, this service is a no-brainer.”

“FreightWaves has carved out a unique position in the North American transportation industry as the data and content provider of choice,” said Kaburick, who is CEO of Trekker Group of Companies. “The TCA Profitability Program is an exceptionally valuable service for participating carriers. Just like any other business, it is imperative that TPP stays relevant, and expands its services available to carriers of all sizes.”

 

 

 

 

 

 

 

 

 

 

 

 

 

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