Volkswagen’s early April Fool’s Day prank (pretending to re-name the company “Voltswagen”) “may have put the company at risk of running afoul of U.S. securities law by wading into the murky waters of potentially misleading investors,” reports CNN:
“This is not the sort of thing that a responsible global company should be doing,” said Charles Whitehead, Myron C. Taylor Alumni Professor of Business Law at Cornell Law School…
Volkswagen is indeed investing heavily in electric vehicles, but confusion over the name change could prompt scrutiny from the Securities and Exchange Commission or litigation from investors who feel misled by the joke. The Securities Exchange Act prohibits companies from making false or misleading statements to investors… Quipping about the status of a business that Volkswagen is positioning as more environmentally friendly also could irk investors, especially in light of the 2015 diesel emissions scandal the company has been trying to put behind it.
“Will the SEC inquire? Well, of course they will,” Whitehead said. “It’s gotten enough publicity and people are concerned about it and there are issues about whether or not companies should be doing this that I’m sure [the SEC is] going to make a phone call.” A representative from Volkswagen’s headquarters said Wednesday afternoon the company had not been contacted by the SEC. The agency declined to comment on the matter.
There is precedent for the SEC taking action against cheeky statements regarding big companies. In 2018, Tesla CEO Elon Musk settled with the SEC for $20 million after the agency said his tweet about securing funding to take the company private at $420 a share — an apparent joke about weed — misled investors…
it didn’t help that the statement announcing the purported name change included no reference to April Fools’ Day — and it landed two days before the holiday… Volkswagen’s stock fell nearly 4% on Wednesday in the wake of news of the debacle. And that’s no joke.
Whitehead doesn’t think the SEC would ultimately consider a name change material to investors, though he adds that “These are all kind of gray areas, which is why a responsible company just doesn’t go down this path….” But with some VW stock near a six-year high, a Bloomberg columnist calls the episode a reminder “that we now live in the meme-stock age where even bad jokes can add or subtract billions of dollars in market value.” They also call it a lesson in just how difficult it is to “be Elon.”
“Charming young Redditors in an authentic way isn’t an easy act to pull off…” Despite being one of the planet’s richest people, Musk’s counterculture savvy and feisty irreverence has made him a hero for Redditors. Tesla has weaponized its soaring share price to raise billions of dollars in cheap funding. That money pays for new factories and products and is a threat to established carmakers. VW must fund its investments via the cash it generates. Even after this year’s blistering run its share price is less than 10 times the value of its earnings. It would be self-defeating if VW didn’t try to be a bit “cooler.”
There’s also a double-standard in play. We expect VW to be reliable, while Tesla gets to be quirky. Indeed, Musk gets away with things that others wouldn’t. For years Tesla has marketed an autopilot system called “Full Self Driving” that can’t yet drive entirely by itself — the timeline for when it will be able to do that always seems to be just around the corner….
Following VW’s successful “Power Day” — a straight copy of Musk’s “Battery Day” event — I quipped that it wouldn’t be long before VW boss Herbert Diess was appointed “TechnoKaiser.” Finance blog Zerohedge came up with the better punchline: “VW should go full Elon and file an 8K saying its new title is Voltswagen,” it tweeted. VW appears to have taken that tongue-in-cheek advice rather too literally. More fool them.
Bloomberg’s columnist also acknowledges that Volkswagen “has an ambitious and convincing electric-vehicle plan and may soon leapfrog Tesla to become the world’s largest battery-vehicle manufacturer. But being ploddingly German is an impediment in today’s stock market.”