attributes, with the biggest declines in the categories of character, trust, culture and ethics.”[1] The Board has not released a public response to this investor letter.
On May 11, 2023, Mr. Musk stated that Twitter had hired a new CEO and that Mr. Musk’s role “will transition to being exec chair & CTO, overseeing product, software & sysops.”[2] The next day, Mr. Musk announced Linda Yaccarino as the new CEO of Twitter. But this announcement does little to address the concerns of Mr. Musk’s dual role. According to Mr. Musk, Ms. Yaccarino “will focus primarily on business operations, while I focus on product design & new technology.”[3] As one former Twitter board member put it, Mr. Musk will be “running product and technology for a 100% software company,” leaving little responsibility for the CEO except maybe “not paying the vendors.”[4] And should Mr. Musk change his mind about stepping down as CEO, there is nothing to stop him from firing Ms. Yaccarino and returning to the helm – because Twitter lacks a board of directors, so long as Mr. Musk retains majority ownership of the private company, he will remain “a dominant force.”[5]
The Role of Tesla’s Board and Potential Violations of Securities Laws
Unlike Twitter, Tesla is a public company listed on the Nasdaq Stock Exchange.[6] As such, it must have an independent board of directors whose role it is to “act on behalf of investors to maximize shareholder value … and guard against conflicts of interest.”[7] But despite repeated calls to address the risks posed by Mr. Musk’s conflicting dual roles at Tesla and Twitter and his actions since acquiring Twitter, the Tesla Board has taken no apparent action to address concerns related to Mr. Musk and protect its shareholders. Whether the Tesla Board is upholding its fiduciary duty to shareholders is largely a question of state law. But for investors to enforce their rights under state law, they need full and fair disclosure of the relevant facts. The Board’s apparent lack of independence, combined with its inaction and incomplete disclosures, raise questions about possible violations of securities laws and exchange rules which fall under SEC’s jurisdiction.
- 1. Potential Violations of Nasdaq Listing Rules
The SEC may open investigations to determine if any person or company has violated “the rules of a national securities exchange,”[8] including Nasdaq. The SEC may bring action for violations of these rules if doing so is “necessary or appropriate in the public interest or for the protection of
- ↑ Axios, “Tesla's reputation slumps as GM, Ford climb,” Joann Muller, May 24, 2023, https://www.axios.com/2023/05/24/tesla-reputation.
- ↑ Tweet from Elon Musk, May 11, 2023, https://twitter.com/elonmusk/status/1656748197308674048.
- ↑ Tweet from Elon Musk, May 12, 2023, https://twitter.com/elonmusk/status/1657050349608501249.
- ↑ Vox, “Who is Linda Yaccarino, Elon Musk’s pick for new Twitter CEO?” Shirin Ghaffary, May 12, 2023, https://www.vox.com/technology/2023/5/11/23720327/elon-musk-new-twitter-ceo-linda-yaccarino.
- ↑ ABC News, “Does Elon Musk's resignation from Twitter mean he'll give up control? Experts weigh in,” Max Zahn, December 22, 2022, https://abcnews.go.com/Business/elon-musks-resignation-twitter-hell-give-control-experts/story?id=95649617.
- ↑ Nasdaq, “Tesla, Inc. Common Stock,” https://www.nasdaq.com/market-activity/stocks/tsla.
- ↑ Nasdaq Marketplace Rule [hereinafter Nasdaq Rule] IM-4350-4.
- ↑ 15 U.S.C. 78u(a)(1).
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