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Short-Sellers Sue Tesla After Musk's 'Going Private' Tweets (bbc.co.uk)
An anonymous reader quotes the BBC:
Elon Musk's bombshell announcement that he is thinking of taking the electric car company Tesla private has landed him a lawsuit from unhappy investors.... His comments caused the share price to shoot up 11% to nearly $380, though it has since fallen back. Short-sellers, who bet on share price falls, allege he misled the market....
Short-sellers, who make a profit by borrowing shares, selling them and then buying them back at an expected lower price, claim to have lost millions thanks to Mr Musk's comments. Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and artificially inflating Tesla's share price. Neither Mr Musk nor Tesla have commented on the lawsuit, which was filed in a federal court in San Francisco.
Tesla "is holding early discussions with banks about the feasibility and structure of a possible deal," Bloomberg reported yesterday -- and Ars Technica points out that if Mr. Isaacs had simply kept his short positions open through Friday, "he would be at least $60,000 richer."
But Isaacs' hopes to be the lead plaintiff for a class-action lawsuit "representing all Tesla shareholders who traded after Musk's tweet on Tuesday or at any time on Wednesday."
Short-sellers, who make a profit by borrowing shares, selling them and then buying them back at an expected lower price, claim to have lost millions thanks to Mr Musk's comments. Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and artificially inflating Tesla's share price. Neither Mr Musk nor Tesla have commented on the lawsuit, which was filed in a federal court in San Francisco.
Tesla "is holding early discussions with banks about the feasibility and structure of a possible deal," Bloomberg reported yesterday -- and Ars Technica points out that if Mr. Isaacs had simply kept his short positions open through Friday, "he would be at least $60,000 richer."
But Isaacs' hopes to be the lead plaintiff for a class-action lawsuit "representing all Tesla shareholders who traded after Musk's tweet on Tuesday or at any time on Wednesday."
Short sellers aren't priced that the price went up - they're pissed that it went up from alleged market manipulation by its CEO, the legality of which will ultimately be decided by the SEC. If the SEC finds that Musk did not have funding for the takeover secured as he claimed in his tweet then he's in for a world of legal hurt.
Before everyone starts attacking short sellers, they actually provide checks and balances against bubbles and fraud.
https://www.investopedia.com/a...
https://money.usnews.com/inves...
If Musk cannot prove in a timely manner (typically 5 to 10 days) that the price AND the offer to take private was valid, he just committed securities fraud. By manipulating the stock price. Regardless of him selling or buying shares.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
This entire discussion is centred around Musk's "funding secured" tweet. Hence a list of the people funding the buyout would be needed. Do try to keep up.
Duh. And how long do you think some phone calls will take?
The board was made aware of it a week before Musk's announcement. Again, try to keep up.
There's a difference between, and I quote, "Investor support is confirmed", and "having all aspects of a buyout deal completely negotiated out and ready to present to a shareholder vote". A buyout is a very complicated process. In past buyout negotiations, such as the last one with Softbank, control of the company was the big sticking point. Funding was not the limitation. And it almost certainly is not here either.
Assuming ethanol comes from murdered children and the hydrogen from magic, hydrogen saves 132% more lives than ethanol.
Yeah, about Saudi Arabia
https://www.reuters.com/article/us-tesla-musk-saudi-exclusive/exclusive-saudi-arabias-pif-has-shown-no-interest-in-bankrolling-tesla-buyout-idUSKBN1KW0FA
Careful.
Look at the link above you from some AC. Basically, banks knew nothing about it until AFTER musk claimed he secured money. If he secured from Saudi Arabia and is just now trying to get a better deal, then he is fine. BUT, if he claimed he had financing when he had nothing, he will likely be in trouble.
I prefer the "u" in honour as it seems to be missing these days.
From the statement of the board:
Assuming ethanol comes from murdered children and the hydrogen from magic, hydrogen saves 132% more lives than ethanol.
That article is wrong based on the underlying linked SEC report on on the notes, either the author didn't read it properly or didn't expect their readers to read it properly. The note holder has the option to convert to stock until a couple days before maturity; the base conversion rate is 2.7788 per $1000 principal (which translates to about $360), but the conversion rate is increased depending upon the stock price given in table 9.03(e), with more shares given for stock prices at the cutoff of $252.54 per share. It gives the same breakeven point on the March 1, 2019 at the prices per share between $252.54 and $359.87.
The timing and reporting issues are listed in 9.01(b), for the listed major company changes (like liquidation) Tesla has to give notification at least 30 trading days in advance.
Frankly, that article set off by BS alarms causing me to look at the supporting material, since it sounded like this conversion was structured as a bonus to lenders if the stock price went really high, not as a way to dodge unforeseen financing trouble years ahead of time. The note holder captures upside to stock prices above $360 from the conversion. Presumably they structured it this way to improve how much money Tesla got up front for selling the notes in the 2013 or 2014 timeframe, and they were willing to trade away some of the upside if the price per share went above $360.
Short sellers, though in principle the practice is legitimate, are typically a crowd of get-rich-fast schemers. The primary reason they are short sellers is not that they honestly believe a company will go down or is overvalued, but that prices almost always go down faster than up. If you want to make money quickly, you go short. If you want to invest and make money in the long run, you go long. Wait, it's even called like that, what a surprise!
Lots and lots of them are in it for short-term profit which is why they have stop-loss orders in place to bail them out if the market goes the other way. And they are often in with leverage, so that they make 10 bucks on every point that the price moves. Which, of course, is also true if the price moves the other way. So their stop-loss orders are often much closer to the current price than it would be for investors who are quite ok with having some up and down movement, because they are looking at the company behind the price and don't care about today or tomorrow, they care about next quarter or next year.
So short sellers are a) make-money-fast guys and b) volatile to price changes going against them. With that, yes they lost millions, I easily believe that, because they probably bought at $350, set a stop-loss order at $360 and were leveraged 10:1 so that the $10 upwards swing lost them $100 per stock.
I so much hope the case finds a judge who understands the stock market and flat out tells them to not play in the kitchen if they can't stand the heat.
They would have been absolutely fine if they would not play with so much leverage that they need tight stop-losses.
Assorted stuff I do sometimes: Lemuria.org