Dividends and 3 takeaways for investors after the Tesla suit

In late September the Securities and Exchange Commission or SEC after investigating a tweet by Tesla’s Elon Musk that he had financing and was going to take the company private determined Mr. Musk in the words of President Trump issued fake news. Unlike President Trump, there are distinct rules and Mr. Musk was fined $20 million and had to step down as Chairman of Tesla. The reason why the SEC did this, while Mr. Musk had talked to potential investors, there was no deal or even close to a deal. Those who bought shares on the announcement quickly lost money. In some companies such as Tesla the founder and the company are wrapped up in each other personalities. Tesla electric cars are the wave of the future and Mr. Musk has repeated that version of the story and many people including investors believe it.

Peter Eavis of the New York Times News Service asks What can you learn from the actions of the SEC:

  1. The SEC have powers and mean business. The SEC can and does act when it comes to the actions on the stock markets. If executives announce something it has to be very close to the truth.
  2. Tesla’s shareholders have to assess what will happen to the company if Mr. Musk is not a big part of it? Often times when someone leaves the emergence of other problems comes as the new guard tries to clean house. Changes in corporate leadership sometimes leads to bruising financial hits and disruptive moves to overhaul the company that does not always pay off.
  3. Beware of the Superstar CEO – In some companies, who the CEO matters, in other companies while the person can have influence the company seems to keep going no matter who is power. Investors read and personalities matter, however at some point the person will not be there – will the company continue?

The last takeaway is wildly bullish statements from CEOs should be treated with skepticism.

Linking to dividend paying stocks, often one of the reasons we buy a stock is who the CEO is both from media following and looking at the alternatives. While it is great to believe in the company from a personal standpoint, from the financial results the company needs to make money or profits to grow to bring the vision to reality. In the case of Tesla, the car is cool, unfortunately it loses about $5,000 per car and we are still hoping for the less expensive models to be a success. This will help the world and Tesla, but while investing before making a decision ask yourself the skeptical questions.

There are more questions than answers, till the next time – to raising questions.

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