New data sources make it harder for executives to mislead investors

“GO STRAIGHT to the source” is a useful rule for anyone seeking accurate information. It suggests that equity investors can best glean insight into a firm by quizzing its chief executive. But bosses are not always reliable narrators. Their position encourages them to be overly optimistic about their company’s outlook. Sometimes they are clueless. And occasionally they are careless about what they tweet.

On February 25th the Securities and Exchange Commission (SEC), America’s financial-market regulator, asked a federal judge to hold Elon Musk, the chief executive of Tesla, a carmaker, in contempt. Mr Musk’s troubles with the SEC began in August when his tweet claiming that he had secured funding to take Tesla private caused the firm’s share price to soar. When the claim proved false, the SEC sued him for securities fraud. They settled in October, when Mr Musk stood down as Tesla’s chairman (he remains chief executive), paid a $20m fine and agreed to have his tweets approved by Tesla’s lawyers. He violated that last condition on February 20th by tweeting that Tesla would produce 500,000 vehicles this year—a claim he later had to clarify—without consulting the firm.

Regulators are not the only ones frustrated by Mr Musk’s antics. Investors have long clamoured for more insight into Tesla’s operations. Happily for investors...



via The Economist: Finance and economics Business Feeds

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