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."

Comments

aww poor baby

[Anonymous Coward]

i made a investment and it didn't pan out. guess i'd better sue

Re:aww poor baby

[Rei]

But, Musk should have warned them that there was major news upcoming that could have a serious negative impact on short sellers. You know, like he's been doing pretty much every bloody week recently.

The short argument to the SEC is basically, "Yeah, he warned us, but we didn't believe him! Also, he didn't tell us the exact date and time he would be announcing the news that would have a negative impact on us, or the exact details of what he was going to announce that was going to hurt short sellers. Also: we don't believe him now either!"

Re:aww poor baby

[saloomy]

Time for some entertainment: Link to Hitler Spoof .

Re:aww poor baby

[Anonymous Coward]

Sorry, but unlike you the SEC is taking this very seriously, and many who understand the applicable laws are wondering why Musk made such a blunder. He publicly announce that funding was secured at a certain price point. If that turns out to be false then he could be prosecuted and also these lawsuits could be shown to have merit.

I know you are a super Musk lover, but at some point you have to agree he likely screwed up royally this time. Do you really think such a CEO should do such a thing when his own board doesn't even know about it?

Re:aww poor baby

[Rei]

"GM's CEO announced that the company produced 13000 cars this week" "Interesting news, Sandra, although if he's lying he'll go to jail." -- said nobody ever.

Here's your logic train:

1) Musk announced news
2) You don't believe the news
3) Giant preemptive scandal without taking any time to substantiate your disbelief.

Meanwhile, preview of the future: here's how it's actually going to play out:

SEC: "Can we see your funding list?"
Musk: "Here you go."
SEC: "Huh, never would have thought that X would be in for that much. And Y's in too? Interesting. Okay, thanks!"

Re:aww poor baby

[Rei]

*** She

Re:aww poor baby

[mwvdlee]

I think privately informing investors (though short-selling is more of a negative investment in a company) before releasing public information that impacts the stock price would amount to investment fraud.

This is pretty much the definition of "butt-hurt".

Re:aww poor baby

[WindBourne]

why has he screwed up? If he actually got the funding, likely from Saudi Arabia, then everything that he said was accurate.
As such, the SEC can not touch him.

And I suspect that the board knew EVERYTHING about this.

Re:aww poor baby

[Rei]

What the hell is 'a funding list'?

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.

The SEC will require a lot more than just some list Musk wrote down

Duh. And how long do you think some phone calls will take?

Then will come questions about why the board was not made aware of these committed investments.

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.

Re: aww poor baby

[Anonymous Coward]

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

Re: aww poor baby

[WindBourne]

huh. That IS an interesting link, and the first time that I have seen anything on here that would indicate that Musk might have future issues.

Re: aww poor baby

[Rei]

Amazing how you can read whatever you want into an article. Right in the first paragraph: to avoid concentrating ownership among a few new large holders, according to people familiar with the matter.

That in no way, shape or form says that there are no "new large holders". Rather, it strongly suggests precisely the opposite.

Control was the key thing that caused the previous buyout negotiations with Softbank to break down previously. Funds from Softbank were there, but Musk didn't want Softbank ending up with so much voting control. Don't act shocked that Tesla to dilute the power of new major holders as much as possible.

Re: aww poor baby

[WindBourne]

Interesting. Thanx.

Re: aww poor baby

[Anonymous Coward]

"if that turns out to be false/a lie, he will be in trouble"

That phrase can be prepended to many things. Lame hypothesis by people with no evidence.

Re:aww poor baby

[LostMyBeaver]

Short selling is not an investment. For the most part, almost all forms of trading is not investing. Investing means you're taking an invested interest in the company. Loaning a company money is investing in that company. Buying shares from an offering is investing in the company.

Short selling is betting against the company. It's pretty much an anti-investment.

When you short sell, you're selling shares you don't even own and then delivering those shares after it fails. You are never really an owner of the shares. You're only ever buying enough of them to deliver them to a customer who already owns them having bought shares from you that you didn't actually own to begin with. The person you're selling to is on the other hand willing to buy shares from you (possibly at a discount) expecting the value to go up instead of down and they are gaining a few bucks by simply buying them for less than their market value.

I am so looking forward to the absolute collapse of the "free market economy". I fear it will send my children to war, but the simple fact that short selling is legally allowed is proof that we have failed.

Re: aww poor baby

[Rei]

Of course, the analysts have been saying all year that Apple should buy Tesla - they're flush with cash and looking for new investment opportunities. Softbank has been raised - they tried to buy Tesla last year, but it broke down over control issues. I don't think it's them because they invested in GM Cruise after negotiations with Tesla broke down. My two biggest bets however would be on either Chinese capital, or Alphabet. One, Tesla's already been negotiating with Chinese investors over capital for the Gigafactory there - and Tesla already has some large Chinese investors, like Tencent. As for Alphabet, like Apple, they're flush with cash and looking for investments, but unlike Apple, Musk is good friends with Larry Page. And Google already nearly bought Tesla several years ago, before Musk broke it off. There's a question of how Waymo would be involved - but then again, Tencent has their own self driving programme too. And Waymo was already around back during the last Google attempt to buy Tesla.

Re:aww poor baby

[Daemonik]

The board was made aware of it a week before Musk's announcement. Again, try to keep up.

Apparently you need to keep up, the board was only told that it was an idea and was not given any of the details either.

The bottom line is that any credible law firm that handles transitions like this would have done it after trading hours, once the board had been fully briefed and all of the funding sources named and proven. Musk could have quite possibly broken the law with his tweet, which will put the short sellers on much firmer footing unless he becomes a hell of a lot more vocal about his plans and can prove that funding was indeed secured before he made his tweet.

Re:aww poor baby

[Aighearach]

Short sellers are not stockholders, they're position-holders. No, they're not due any information.

This lawsuit was designed to trick people like you. On the internet. To try to push the stock price down.

Securities law protects shareholders, not position-holders. It also only protects them from harm. That's a one-way protection; you're protected more from lies that cause the price to go down than lies that cause the price to go up.

The cases where people got in trouble when they lied and the price went up tend to be cases where they traded in the stock after lying or else tipped select other people off beforehand. If he didn't sell anything when the price went up, then it is unclear which shareholders were "harmed?"

Also, you don't work for the SEC, and if you did, you wouldn't be allowed to tell us anything. So there is no need to pretend you get to make up statements about them. It is far more likely that when they said they're looking into it, they meant they were looking into if he was making trades that benefited from his statement, since that is the main thing they check and people were acting so concerned.

Re:aww poor baby

[Daemonik]

And I suspect that the board knew EVERYTHING about this.

Apparently, you'd be wrong.

Re:aww poor baby

[AutodidactLabrat]

Thanks.
At least SOMEONE knows that short sellers are not entitled to prior knowledge of every management plan.

Re:aww poor baby

[Daemonik]

I agree, short selling and day trading are the antithesis of what the stock market, as a form of distributed INVESTMENT, is supposed to be. It encourages the lifestyle we have now of quarterly ROI being more important than long term company health.

Re:aww poor baby

[haruchai]

Time for some entertainment: Link to Hitler Spoof .

That's an old one. Here's a newer and better one - https://www.youtube.com/watch?...

Re: aww poor baby

[Aighearach]

420 is an auspicious number in Asia, and they needed a round number above the current price. I'm betting SoftBank is involved, and they found additional Asian investors; probably from Singapore, Taiwan, and South Korea. And I'd expect the Saudis to be a huge but totally silent partner.

Probably part of the solution is that by having a large silent partner that allows Musk to keep the control he needs, while allowing SoftBank to get the control they feel entitled to from the size of their investment. SoftBank is a technology company, they'd never accept being a silent partner in something that could affect their other investments. Whereas the Saudis would be looking at it more as a petroleum hedge, and they'd probably prefer being a silent partner.

But of course they want to shrink the size of the largest investments as much as they can. I would too, but little fish don't get to take as big a bite as Musk can manage.

Re:aww poor baby

[magarity]

i made a investment and it didn't pan out. guess i'd better sue

Short selling by itself is not an investment, it is just a gamble. Short selling as a hedging mechanism is investing and no one doing that with Tesla stock was hurt in any way.

Re:aww poor baby

[Aighearach]

Shorting isn't an investment at all, it is just a "position" on an investment. The only person in that situation who is protected by securities law is the person going long; that's the actual investor that is involved. And they're considered to be harmed by the stock price going down, if it goes up that doesn't hurt them at all.

It is like worrying if gamblers can sue a sports team. No, they can't. Assuming that "case dismissed" counts as "can't," anyways. Sponsors and team creditors have a much higher likelihood of having a fraud case in a fixed sporting event.

Re:aww poor baby

[RhettLivingston]

uuhhhh, I'm pretty sure he did warn them - in June.

Musk: They have about three weeks before their short position explodes

As usual, a little off in the timing, but his record for making things happen is actually very good if you simply disregard the fact that he always uses the stretch goal time he is pushing for instead of something realistic - a characteristic I believe is the key to success.

In addition, this could be considered a very nice warning that they wouldn't get from other companies. They should be very thankful for this early, unclear disclosure. If he warned of major news coming, they would likely have shorted some more by talking themselves into believing it was a major round of financing or factory build that needed another couple of billion real soon. If he came out with a mostly settled buyout offer for $420, the stock price would have shot to near that and stayed.

Instead, he has created an opportunity to get out of those short positions very near to where the stock was before he made the announcement. It is a huge gift. Will they use it? Of course not. They'll probably double down. Tesla's doom is a religion to them, not an investment strategy.

Re:aww poor baby

[Rei]

Apparently you need to keep up, the board was only told that it was an idea and was not given any of the details either

From the statement of the board:

Last week, Elon opened a discussion with the board about taking the company private. This included discussion as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur. The board has met several times over the last week and is taking the appropriate next steps to evaluate this.

Re:aww poor baby

[Anonymous Coward]

The board was made aware of it a week before Musk's announcement. Again, try to keep up.

That is false. He mentioned only, in passing, that he was considering it. There really was not discussion beyond that.

Re:aww poor baby

[Anonymous Coward]

The board is evaluating it because they are now forced to. They were not evaluating it at the time of the tweet nor was there an agreement to evaluate it.

Re:aww poor baby

[easyTree]

Musk is deliberately trying to increase the value of his own company!!!! wtf???

Re:aww poor baby

[easyTree]

roflmaolololol

Re: aww poor baby

[WindBourne]

Musk would never be so foolish as to borrow that kind of money from China where they would have full access to everything.
I have said for a long time that the Google boys would back him if needed, but still. 82B is a lot.

Re:aww poor baby

[WindBourne]

Yeah, I have to say that is surprising. They knew that he was thinking of going private, but apparently do not know the details.
That is concerning.

Re:aww poor baby

[Daemonik]

"Addressing" the funding is not the same as "was given detailed and confirmed solid funding plans".

Re:aww poor baby

[DamnOregonian]

That isn't even remotely illegal.
Though in my experience, it does usually net you a pretty pissed off board.

Re: aww poor baby

[laird]

While it's entertaining to imagine Apple buying Tesla, because the companies are quite similar in some ways, I think it's unlikely for exactly the same reason. Apple's winning strategy is to control everything that they can, because they are visionaries and perfectionists, and produce products that customers love. Same for Tesla. That makes them fantastic companies, with fantastic products, but terrible partners - they would both drive the other crazy trying to control everything.

Re:aww poor baby

[haruchai]

Apparently you need to keep up, the board was only told that it was an idea and was not given any of the details either

From the statement of the board:

Last week, Elon opened a discussion with the board about taking the company private. This included discussion as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur. The board has met several times over the last week and is taking the appropriate next steps to evaluate this.

Elon's tweet clearly blindsided the board and now they're going to have to scramble to find something plausible to show the SEC.
What should have been done was to file an 8K prior to dropping any hints on social media.
If he / Tesla had done this and tweeted 1 second later, I would say that the shorts can go eat a dick for all i care - not that there's anything wrong with that - but this shoot from the hip behavior has gone too far.
And if it turns out he does NOT truly have secured funding, that's a really big frickin' deal

Re: aww poor baby

[CaffeinatedBacon]

You are always wrong Windy. Don't just go with your feelings. Try a fact or two for a change.

Re: aww poor baby

[slashdice]

The actual price is 420.69, which is an auspicious number for South Africans who spark up a fat blunt and then perform reciprocated oral sex.

PS - SoftBank and the Sauds both deny involvement.

Re:aww poor baby

[rtb61]

What the fuckiy fucking fuck. Short sellers are not investors into any company in history, short sellers are investing against a company. Short sellers are actively, factually, striving to drive down a stock price, by publicly stating that is it worth less the the market in general claims, they borrow shares and then pretend to own them and then pretend to sell them but the sort of do but not really, they have to buy them in the end, actually invest in the company, rather than investing in a pretend transaction. You see, when the short comes due, when they actually have to pay, is when they actually buy the stock, actually invest in the company and than give that stock back to the people, the brokerage house, they pretended to borrow it from.

Shorting a stock is most definitely not an investment in a company, it is the public purposeful attempt to drive down stock price by selling down pretend stocks you do not have. They are a corrupt market mechanism designed to drive stock price rise and falls. Shorts and puts for a legal stable stock market should be banned but corruption demands them. That is the reality. They are bitching that their corrupt attempt to drive down the stock price, hundreds of millions invested in the scam, not in the company, failed because the CEO had plans for the future, the law suit is a joke (those dumb fuckers don't own any stock, they just promised to buy it and give it back after pretending to borrow it and selling it to drive down the stock price, so they can buy it cheaper than the price they pretended to sell it for).

Re:aww poor baby

[etash]

I wanted to artificially make the stock go down (short selling) and it didn't work this time, I lost money, I'm not a good manipulator. fixed that for ya.

Re:aww poor baby

[Cederic]

the person going long; that's the actual investor

Wrong on two counts. Someone investing in put options is still an investor. The person going long is the one buying call options.

Re: aww poor baby

[Rei]

Actually, the situation has been reversed. The Saudis are in negotiations to take part in buying Tesla.

Re: aww poor baby

[Rei]

1) That wasn't me (but again, nice of you to assume I'm omnipresent. Am I all powerful too?)
2) Reuters was wrong.

Re:aww poor baby

[jareth-0205]

why has he screwed up? If he actually got the funding, likely from Saudi Arabia, then everything that he said was accurate.

As such, the SEC can not touch him.

And I suspect that the board knew EVERYTHING about this.

*If*.

That's the bit we don't know yet. Even if he has the funding and doesn't go through with it, it will still have been a deliberate manipulation.

Re: aww poor baby

[ArmoredDragon]

Reusable rockets, fastest 0-60 street legal cars, a battery that sustains a large region in Australia... Yep, pretty insignificant.

So tell me, just how much have you made shorting Tesla so far?

Re:aww poor baby

[Aighearach]

Splitting hairs finely within the margins is just silly.

Shorts and longs, without modifiers, are people holding short and long positions. People holding put options are holding short options, they're not holding shorts, and they are not "shorts" unless the context is already limited to options.

Re:aww poor baby

[Hognoxious]

If you don't like his logic train try this:

----

240.14e-8 Prohibited conduct in connection with pre-commencement communications.

It is a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the Act ( 15 U.S.C. 78n) for any person to publicly announce[1] that the person (or a party on whose behalf the person is acting) plans to make a tender offer[2] that has not yet been commenced, if the person:

(a) Is making the announcement of a potential tender offer without the intention to commence the offer within a reasonable time and complete the offer;

(b) Intends, directly or indirectly, for the announcement to manipulate the market price of the stock of the bidder or subject company; or

(c) Does not have the reasonable belief that the person will have the means to purchase securities[3] to complete the offer.

----
[1] tweeting about ...
[2] taking it private ...
[3] and using the words "funding secured"

If this definite cast-iron pinky-swear scouts-honour funding turns out to be more like a hypothetical conversation with some banker buddy over a few beers he's going to be sharing a cell with Donald.

Re: aww poor baby

[DarylDerksen]

Are you on the board? How do you really know it was only mentioned in passing?

Re:aww poor baby

[Savantissimo]

Also, how do short-sellers even have standing to sue? They aren't shareholders. Musk has no duty to them. On the contrary, Musk actually has a legal duty to make them lose money.

He didn't say the deal was going to happen, either, he said he was "considering" it. "Funding secured" in that context means nothing more than he has reason to be confident he can get the money to do the deal _if_ he decides to. Perhaps he should have phrased the latter a bit more cautiously, but the message was clear on its face that the deal wasn't even definitely _intended_, let alone done.

The shorts don't have a leg to stand on in court and should not make it past summary judgement.

Re:aww poor baby

[minstrelmike]

_lying_ about your stick publicly is only about manipulating prices and that is actually illegal, and is technically, exactly what Musk did. If the board was thinking of taking Tesla private, the board can make an official announcement.

Seriously, Elon ought to shut the hell up and concentrate on building vehicles, let the short-sellers argue amongst themselves. Essentially Elon, Don't feed the trolls.

Maybe they can short sell a tiny violin

[serviscope_minor]

Short sellers pissed off that the share price went up? let me see if I an find something small enough to hold the sympathy I feel for them.

Re:Maybe they can short sell a tiny violin

[JoeyRox]

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.

Re:Maybe they can short sell a tiny violin

[Rei]

Market manipulation to what, exactly? Did Musk sell any shares? No? Really solid market manipulation case you've got there.

Your "case" is also premised on your concept that there actually aren't investors supporting the buyout deal. And rushing to sue even before an 8-K would be due.

OMG, news hurt your short positions. My heart breaks for you.

Re:Maybe they can short sell a tiny violin

[Mr D from 63]

Short sellers pissed off that the share price went up? let me see if I an find something small enough to hold the sympathy I feel for them.

Some of the longs might get pissed as well. By tweeting such a thing, future investors may not be willing to pay as much knowing Musk may limit their upside with a buyout. Tweeting something that causes an SEC investigation isn't good for the company as whole.

Re:Maybe they can short sell a tiny violin

[whoever57]

Short sellers aren't priced that the price went up - they're pissed that it went up from alleged market manipulation by its CEO,

I have some fine land in Florida to sell you. It's just a bit wet.

Of course short sellers are pissed the price went up. Short sellers haven't cared about Musk's earlier tweets that depressed the stock price. Short sellers also engage in market manipulation. All the short sellers care about is profit -- they don't care how or why.

What's different is that Musk gave them an opening to sue the company. I suspect it is a very small opening and I doubt they will get anywhere, but with billions at stake, why not try?

Re:Maybe they can short sell a tiny violin

[LynnwoodRooster]

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.

Re:Maybe they can short sell a tiny violin

[JoeyRox]

The market manipulation he's accused of is announcing the existence of a private takeover offer with secured funding but where the funding may not actually exist, at least not at the time of his announcement. If that's proven to be the case then he made a material misstatement that affected the underlying price of his company's shares - that's called market manipulation.

Re:Maybe they can short sell a tiny violin

[Hognoxious]

Short sellers also engage in market manipulation.

IANAL but I suspect it's considered a little bit more serious when it's an insider - like the CEO - doing it.

Re:Maybe they can short sell a tiny violin

[WindBourne]

Sorry, but I think that Rox is correct. Elon said that he had funding for it. He himself does not have 82B. As such, he would have had to secure it from elsewhere. If he did, then not a problem. OTOH, if he lied about that, I agree with Rox. Elon would in a world of hurt.

Of course, Musk has not been a liar. His timelines suck, but a liar? Nope.

Re:Maybe they can short sell a tiny violin

[Known Nutter]

If Musk cannot prove in a timely manner (typically 5 to 10 days) that the price AND the offer to take private was valid

I would wager that information was already available prior to the tweet. It has likely already been provided to the SEC along with a box of chocolates. Do you think he is that stupid?

Re: Maybe they can short sell a tiny violin

[Rei]

Cite the code please. I'm looking at the Securities Exchange Act Of 1934 right now. The closest I can see is section 9a.5, but that's for people "selling or offering for sale or purchasing or offering to purchase the security". I see nothing affecting people who are neither buying nor selling.

Also, to reiterate:

Your "case" is also premised on your concept that there actually aren't investors supporting the buyout deal. And rushing to sue even before an 8-K would be due.

OMG, news hurt your short positions. My heart breaks for you.

Re:Maybe they can short sell a tiny violin

[Kjella]

Market manipulation to what, exactly? Did Musk sell any shares? No? Really solid market manipulation case you've got there.

Uh what? Stock price manipulation to get a CEO bonus, to secure some line of credit, hold off some a vote by the board to replace you, help your golf buddy to sell off his stock... there's all sorts of reasons why manipulating the stock price by itself is illegal. Musk better have backing for what he said or else he may have taken his extremely optimistic and premature announcements one step too far.

Re:Maybe they can short sell a tiny violin

[WindBourne]

???
First off, he never made an offer. He said that he was thinking about taking it private and that he had secured money for $420/share.
He would have to fully tender the offer and then the board and us stockholders have to decide.
Finally, the only ones he has to prove to, is the SEC. And they will investigate on their own time. More importantly, I think that the ONLY issue that they will have is did he secure the financing, or least make the attempt to do so. If no attempt, well, he just manipulated. OTOH, if he was trying to obtain it, and had reason to think that he had secured it (but had not), then he was legal.

Re: Maybe they can short sell a tiny violin

[reanjr]

That was my first thought as an investor. My hope is for a short squeeze, which could result in a $20B injection, which can send the price far higher than $420. I'm not upset though because I'm not a fucking litigious snowflake like the idiot shorts.

Re:Maybe they can short sell a tiny violin

[Aighearach]

And rushing to sue even before an 8-K would be due.

People who never even heard of an 8-K before are filling up the comments with fretting over it not being filed, but they only ever heard people blathering about it, they didn't even look up what it is and when you need to file it.

It is certainly true that an 8-K filing would be required within 4 days of a board action attempting to take the company private. Also if they consummated an investment deal of some sort, they would have 4 days to file it. But there is nothing about filing it within 4 days of thinking about it, or within 4 days of telling somebody they're thinking about it, or within 4 days of scheduling a board vote that would itself only mark the beginning of negotiations instead of the consummation of the deal.

Almost any other 8-K filing would be an update because some detail included in the quarterly 10-Q or annual 10-K filing had changed. Announcing a possible new deal that wasn't mentioned in the 10-Q isn't going to need updating.

Re: Maybe they can short sell a tiny violin

[Aighearach]

Even worse, while the "shorts" aren't protected, the "longs" are! If you lie and the shorts lose money, that's not even regulated. If you lie and the shorts earn money, that is regulated because you harmed the longs, who are shareholders!

They're not just wrong, they're running the wrong direction from the starting line.

Re:Maybe they can short sell a tiny violin

[Aighearach]

Your words claim that manipulating stock is illegal in the abstract, but your examples are all cases of somebody getting personal gain out of the action.

Your argument is not supporting the distinction you're trying to make. You merely found additional specific behaviors that when combined with manipulation of a stock price, add up to something illegal. You have to do it for some sort of gain, though; it isn't illegal in the abstract.

If their isn't any sort of improper gain, then it is lawful stock manipulation. For example, if the CEO tweets: "Product A's new version is so awesome, everybody is going to just love it! I can see the future, and the future is Company and Product A!" Totally legal, even if the stock price goes [up or down].

Re:Maybe they can short sell a tiny violin

[Aighearach]

Short sellers aren't priced that the price went up - they're...

... priced that they lost so much money gambling, that they're going to be pricing lots of stuff that they used to just buy without pricing. And they've lost so much money that many of the things they're not even used to pricing now seem priceless. They're priced that they're priced out of their pricey prices.

Re:Maybe they can short sell a tiny violin

[LynnwoodRooster]

He confirmed that funding was secured. Meaning - already in-hand. If not, then that is securities fraud.

Re:Maybe they can short sell a tiny violin

[WindBourne]

Secured does NOT mean in hand. It simply means that he has access to the money.
BUT, he damn will needs to have proof that he had, at least, talked to others and they gave at least a verbal yeah. But I would think for 82B, he would want that in writing.

Re:Maybe they can short sell a tiny violin

[gravewax]

Musk is the CEO, He made a market statement that he had secured funding and at a price of $420 a share. If true all is good and the short sellers can go suck a lemon. If not true then Musk will most likely have his arse sued off and be forced to cover those losses as well as some serious legal issues with the SEC. you can't make market sensitive statements about your company as the CEO if they are not true, that is fraud. It doesn't matter whether he sold or bought shares, that is completely irrelevant.

Re:Maybe they can short sell a tiny violin

[gravewax]

Making an offer is irrelevant. HE MADE A STATEMENT that he knew would directly affect the share value, i.e. by stating he had securely funding for $420 a share. He now must show that too his board if they don't already have it as well as the SEC. Failure to do so will be considered fraud.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

The SECs interest revolves around the 'Funding secure' claim. There's no legal jeopardy in saying that he is considering taking the company private, unless someone has direct evidence that he said it with intent to mislead.

The SEC will see if it was reasonable for him to say the funding is secure, and if it is not, they'll char broil his ass. I don't really see why there is so much speculation about what is or is not illegal, or how anyone can claim the guy is guilty of anything at this point.

I'm pretty sure there would be a literal line of interested parties to pick up Tesla. Even if the business side of things aren't looking too fantastic, the product they're selling is performing positively amazingly. That's worth every penny.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

You are talking out of your ass. Stop it.

The corporation I work for has gone through all kinds of ownership changes, board shakeups, and sales.
Secured funding does not mean in hand. It doesn't even mean 'there isn't a whole fuckload of strings attached'

What the fuck is your position in this? You spend some money on the short?

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

He himself does not have 82B

Nor does he need to, though.
He only needs to buy out the holdouts.
Musk and other reliable insiders control about 25.5% of Tesla's voting stock.
He only needs to secure funding for the amount he imagines will not want their shares to become private.
In the end, he will need to have actual funding for the actual amount that do not want their shares to become private.
I suspect given Tesla's investor loyalty, he won't actually have to buy many people out.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

You are of course totally correct.

However, your example doesn't apply to Musk in this instance at all.

"Funding secured." puts him in legal jeopardy if he is lying. There is significant wiggle room though, because he just needs believable math indicating he has parties agreeing to buy out the amount of people he anticipates not wanting their shares to become private.

Re:Maybe they can short sell a tiny violin

[rahvin112]

Nice armchair lawyering.

Whether or not Musk committed a crime will be up to a court to decide. But any legal action will not be premised if the deal's details were completely worked out, but on if he's actually started the process. All information does indicate that he started the process to go private but this will be decided in court as it should be.

Re: Maybe they can short sell a tiny violin

[CaffeinatedBacon]

Just trying to secure it is not enough. He needs to prove he actually had the funding secured at the price he claimed and at the time he claimed it.
Maybe he did maybe didn't. None of us know, just eat your popcorn and wait.

Re:Maybe they can short sell a tiny violin

[LynnwoodRooster]

In a legal, SEC "I can release the information" standard, yes secured funding has a very specific meaning. Meaning - you have it.

Re:Maybe they can short sell a tiny violin

[Jeremi]

Do you think he is that stupid?

No, I think he's extremely smart -- which is why it's so odd that he would do something so needlessly self-destructive and dumb as sending that tweet.

It's obvious from reading this week's headlines what he stands to lose by doing so; but what (if anything) did he think he stood to gain? A temporary rise in Tesla share prices? (hopefully that wasn't what he was after, because that would be the textbook definition of stock manipulation) The satisfaction of "owning the shorts" and winning a Twitter fight?

To me it looks like Musk's finger hit the "send" button before his brain finished working out the consequences of doing so. IMO if Twitter would implement a 15-minute cooling off period on all tweets, the world would be a better place.

Re:Maybe they can short sell a tiny violin

[Rockoon]

Thats not what secured means.

Secured does not mean that the money is committed to anything other than being where it is, and absolutely does not mean "irrevocable" .. what you are talking about is a secured loan maybe.. but why the FUCK would you be talking about those?

Seems to me that you dont know what you are talking about regardless of anything else. Doesnt matter what the explanation is. You are full of shit right now because the subject is secured funding, not secured loans. Period.

Re:Maybe they can short sell a tiny violin

[theCoder]

IANAL either, but my understanding is that insider information always exists. Using insider information to make stock purchases or sells is considered illegal. For example, if Musk knew he was going to tweet what he did and bought a bunch of Tesla right before that to make a bunch of money when the stock went up, that would be insider trading.

However, when the company (or an officer of the company) makes that information public, it is not really insider information any more. Twitter being very public, it would be hard to argue that Musk's tweet was insider information after the tweet.

So all that's left whether releasing that information is OK. There may be some rules I'm not aware of, but as long as the tweet was honest and made in good faith (i.e., not a lie or deception) there's nothing wrong. Consider a case where a pharmaceutical company makes a surprise announcement of a cure for some disease. That would probably make their stock go up, and short sellers wouldn't have any recourse. Why would they? They bet against the stock and they were wrong. Too bad. You gamble and you lost.

Maybe a bigger problem is that a stock's value swings wildly based on Twitter and not based on solid financial data. But that's a larger problem in the market, not specific to Tesla.

Re: Maybe they can short sell a tiny violin

[Cederic]

Well, looks like he's fucked up on IM-4120-1 for a start, assuming he wasn't lying.

If he was lying that's likely actionable under more general fraud laws.

Re: Maybe they can short sell a tiny violin

[mlyle]

You're looking in the wrong place. 15 USC 78(u)(a).1 authorizes investigations and assignment of civil penalties associated with security *REGULATIONS* established under the securities acts, along with blue sky laws and other mechanisms. Criminal liability can in turn attach from violation of the regulations, per 78ff. So you need to leap from USC to the extensive CFR to know the established regulations (though such regulations are void to the extent that they exceed the SEC's statutory rulemaking authority and conflict with actual established law).

Re:Maybe they can short sell a tiny violin

[LynnwoodRooster]

And from the other /. story (where he's talking with the Saudis to help fund the idea), his funding was not secured. It's not available, the source to supply it has not agreed yet.

Re:Maybe they can short sell a tiny violin

[LynnwoodRooster]

Please see the legal definition of secured. You secure financing when you have a deal done. There is NO securing a deal before it is complete. If he does not have funds committed in the amount of $72 billion, he's committed fraud. You can try to justify it all you want, but it definitely appears that Musk stepped in it, legally.

Re:Maybe they can short sell a tiny violin

[LynnwoodRooster]

Yes. Did you see the change in stock price as soon as he tweeted, and in fact trading in TSLA stopped soon thereafter? That's called stock manipulation, and it's why communications from companies is heavily regulated.

Re:Maybe they can short sell a tiny violin

[Aighearach]

Lying isn't the same as, "He didn't tell me the details" though, or even, "I have no idea because he didn't tell me."

He has 4 days after the board votes to accept his offer to file an 8-K telling people about it. Unless he mentioned it in the quarterly 10-Q or annual 10-K filings, they don't get any update or warning that it is being considered, and they're not due any evidence. That's the absurdity of the complaints. No, there is nothing unusual about him not providing public evidence. The schedule for that is written right into the statute! Consumation of a deal is what they have a right to know about, not the beginning of a courtship, or the wooing of the board.

Re:Maybe they can short sell a tiny violin

[Hognoxious]

my understanding is that insider information always exists. Using insider information to make stock purchases or sells is considered illegal.

True, but that's something else.

https://www.cnbc.com/2018/08/0...

240.14e-8 Prohibited conduct in connection with pre-commencement communications.

It is a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the Act ( 15 U.S.C. 78n) for any person to publicly announce that the person (or a party on whose behalf the person is acting) plans to make a tender offer that has not yet been commenced, if the person:

(a) Is making the announcement of a potential tender offer without the intention to commence the offer within a reasonable time and complete the offer;

(b) Intends, directly or indirectly, for the announcement to manipulate the market price of the stock of the bidder or subject company; or

(c) Does not have the reasonable belief that the person will have the means to purchase securities to complete the offer.

Seems you aren't allowed to run a play-action on a takeover.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

No, it isn't, and you're 100% right- the only issue at play, period, is whether the public statement of having funding is false or not, which *will* be interpreted as manipulating the market if it is not. But like I said, it has to be *really* false in order to be criminal.
He has no legal obligation to the board at this point whatsoever.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

No, he needs to be able to buy out everyone who can potentially sell

No. I'm sorry, but you really have no idea what you're talking about.
Having been a part of a MBO, that is simply not how it works.
Minority shareholders who object to the sale will be offered a dollar amount and be forced to take it.
Non-objecting shareholders do not have to be bought out at all, their shares can be converted to private shares, *if* that's the goal of the MBO.
This isn't usually too much of a concern of the new ownership since the private shares will be subject to shareholder agreements.

It was a childish and idiotic attempt to "squeeze shorts"

Oh I don't think he's trying to squeeze them. I think he's sinking them.

brought about by paranoia and the accidental billionaire's belief that they are beyond the law.

Not liking the guy isn't a good reason to fabricate shit on the internet.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

No, you're talking out of your ass. Saying "funding secured" means effectively having the money "in hand", because such agreements are implemented in only one way - by a bunch of expensive lawyers, using a third party escrow, usually a very large bank as a guarantee that neither party can walk away. Such things make the news, or they don't exist.

Literally everything you said in that paragraph was wrong.

Otherwise it isn't an agreement

Secured funding can be nothing more than a promise. Nor does it need to make the news.
I've been member to an MBO. You're either painfully stupid, or you're on a mission to misinform.

In this case, with a self-confessed goal of "squeezing the shorts". Which is, well, criminal.

There is nothing illegal about "squeezing shorts"
In fact, any CEO doing his job right will be "squeezing shorts"
AC, I've seen you shitposting all over this articles commentary. I just want to know- how much are you out because of this?

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

In a legal, SEC "I can release the information" standard, yes secured funding has a very specific meaning.

You're completely full of shit, and you know it. I invite you to cite the rule or statute. Go ahead, I'll wait.

Meaning - you have it.

Negative. That's one possible meaning to it, but generally the term is used in LBOs or MBOs to infer that you have the money available in good faith. Usually, this means an investor has offered you the money with a set of stipulations.

Quit. Fucking. Lying.

Re:Maybe they can short sell a tiny violin

[DamnOregonian]

The short-lived spike in the price of the stock due to his unfounded claims (and it is already clear that the claims were unfounded, there is no indication that even his board knew about the secured financing), people may have made decisions that materially affected them.

He's under no obligation to have informed his board. But one could definitely argue it would have been wise.
However, being he has control of the board, and they couldn't muster the votes to boot him out if they wanted, one could also argue that lack of wisdom is his prerogative.

And it is not only "shorts" who may have been, it is quite possible that some holders bought the stock during the spike, would not have done so had there been no misleading tweet from the CEO.

You're correct. And if his statements are found by the SEC to be false, or were made with intent to mislead, as I said, they'll char broil his ass. But your reasoning behind the belief of it being a falsehood is wrong on its face, which is not to say that you're wrong. Just ignorant or bad at comprehension.

Discussing the irresponsible behavior of Musk by his investors is totally relevant

Agreed. But chanting 'lock her up' makes me roll my eyes, and that's what your'e doing.

Actually, his board should also take notice and rein him in.

They can only take symbolic action against him.

If not, they will see more activist investor action, not less. And not very far in the future.

Probably true. However- Musk is not wrong that something sticks with the short position. It really does smell like there's a well funded vendetta against him, and like it or not, he does have an interest in crushing it- and he may well be about to do that.

Re:Maybe they can short sell a tiny violin

[Aighearach]

If you know you don't have enough information to evaluate it, it is pretty hard to claim that you were misled. It is when you're given enough information to form an opinion about it, and you were given false information, that it would add up to being misled.

Obviously it wasn't criminal, that only even comes up if he traded based on the change he caused, or otherwise obtained an improper personal gain. If he merely misled the market because he was a dumbass, or an asshole, or whatever, then that results in a civil SEC action, not a criminal action. That's how far from reality most of this analysis is; there isn't even an attempt to differentiate between crimes, violations, and torts.

Re: Maybe they can short sell a tiny violin

[WindBourne]

It was not a legal contract. It was simple English.

As such, I'm sure that his meaning is different. succeed in obtaining (something), especially with difficulty. "the division secured a major contract"

Vs

seek to guarantee repayment of (a loan) by having a right to take possession of an asset in the event of nonpayment. "a loan secured on your home"

Reads to me like the first, not the later.
https://www.google.com/search?...

Re: Maybe they can short sell a tiny violin

[CaffeinatedBacon]

But did he succeed in obtaining something? The Saudi's clearly don't want to say they have committed to anything.In fact they said

the managing director of the Saudi fund had expressed support for proceeding subject to financial and other due diligence.

(Emphasis mine.)That clearly implies they are thinking about it but it hasn't been decided yet.
That isn't secured.

If I cried to a casino they gave me a losing hand.

[Fly Swatter]

I would be laughed out of town.

Lemme help you out

[willoughby]

I'm not experienced in the stock market so I may need an aid. Pull out that guarantee from your pocket and let's go over the language together...

Lone Skum

[PopeRatzo]

This is a trick that Elon Musk can only pull once. If he doesn't take the company private, his move will be seen for what it was, a desperate attempt to shore up stock price by putting out the rumor that he was "thinking about" doing something.

If the company doesn't go private, those short-sellers will have their revenge. Consider: If you were thinking about taking a company private (which means buying up stock), would you make an announcement that will raise the price of the stock so you have to pay more?

Musk is trying to buy time for Tesla. That's cool, but he's skirting a fine line. It'll be interesting to see how this plays out, but I assure you there are people at the SEC looking into it.

Re:Lone Skum

[WindBourne]

First off, he announced the price that he thought was fair, which was 420. That was above it, so, he is legally fine. In addition, I would assume that he had lined up money prior to that announcement, like he said. Assuming that he did, then EVERYTHING was legal and above board.

The real problem is when you have ppl like Chanos, or his good buddy, David Tamberrino, manipulating the stock with loads of lies, well, they are likely the ones that will be getting into trouble with the SEC.

What is really bothersome is that CHanos has been smart about Enron as well as China. But now, he is getting greedy and wanting to manipulate the markets. BIG mistake.

Re: Lone Skum

[that this is not und]

A lot of the most strident Tesla supporters, especially here on Slashdot, are ideological investors. They think Musk is an environmental savior doing good for the planet. As such, they view any attackers as evil. Not just wrong or misguided. Evil.

It's a nice little army for Musk to have marching for him. It badly distorts the discussion. Many investors have no ideological motivation, wether they are short or long, the ideologues could turn on them at any time.

Re: Lone Skum

[WindBourne]

why is buying at 150 wrong?
Right now, the stock IS overvalued, however, we are in it for the long haul.
I am a supporter of Musk, but that does not mean that I will invest wildly into a losing operation. However, with the massive manipulation that is going on by the shorters, I expect that this will run all over the place. So, far better to sit tight and let Musk do what he is good at: build up a winning company.

Re:Lone Skum

[thegarbz]

Consider: If you were thinking about taking a company private (which means buying up stock), would you make an announcement that will raise the price of the stock so you have to pay more?

Was that a trick question? The answer is yes and it's not relevant to you in the slightest.

You can't just buy up a company for the current price of the stock and be done with it. You actually need to buy the stock for significantly more than the list price. This price is fixed in the offer in advance and is also the reason the price shoots up in the first place. It is also a price that is typically negotiated and the process of going private it something that can take well over a quarter while the stocks happily continue trading.

TL;DR: There's neither benefit no ability to keep going private a secret.

Re: Lone Skum

[that this is not und]

Right. My grandpa told me in 1968 that The Oil Companies had bought the patent for the simple inexpensive additive that turns tap water into 100 octane gasoline.

Big Oil. What WON'T they do?!?

Re:Lone Skum

[strikethree]

This is a trick that Elon Musk can only pull once. If he doesn't take the company private, his move will be seen for what it was, a desperate attempt to shore up stock price by putting out the rumor that he was "thinking about" doing something.

Somehow or another, I doubt that Mr. Musk is desperate about anything. I have no inside information, but his needs are likely taken care of for the rest of his life.

To be honest, I am not even entertained by all of this drama. The manipulators should be taken out back to the chemical sheds and shot. I am glad that their lives revolve around something that satisfies them but I am unhappy that such business requires corrupting simple efforts of producing useful goods.

Re:Lone Skum

[PopeRatzo]

Somehow or another, I doubt that Mr. Musk is desperate about anything. I have no inside information, but his needs are likely taken care of for the rest of his life.

You think Elon Musk is in business for sustenance? Why do you think he's still doing anything? He's going for high scores now, and yes, chasing high scores can make you desperate.

Even the people on the boring business shows where they have stock tickers running across the screen have been saying this is a dangerous game Musk is playing. The SEC takes maniuplating stock prices very seriously.

Re:Lone Skum

[strikethree]

If you do not need to worry about basic life security, then NOTHING is desperate. It can be intense, but perhaps we have different understandings of the word "desperate". Not a huge deal. To me, desperation is when there is no room in you for anything else other than what is at hand. Like when you are drowning or something.

The SEC takes maniuplating (sic) stock prices very seriously.

Apparently, they don't. The short sellers seem to be going to great lengths to manipulate the price and we even know some of their names... and the SEC is doing nothing about it.

Re:Lone Skum

[PopeRatzo]

f you do not need to worry about basic life security, then NOTHING is desperate. It can be intense, but perhaps we have different understandings of the word "desperate".

I think maybe you are unfamiliar with the mentality of a billionaire. It takes a different kind of psychology to want to get that rich. I admit, it's kind of alien, but there really is no other explanation for someone to want to amass that kind of fortune.

You or I might have enough socked away to live comfortably for the rest of our lives and we'd feel fulfilled. We'd do good works for people and enjoy life. A billionaire, by definition, has a hole inside him that no amount of wealth can ever fill up, but is consumed with fear of losing.

Ha! Ha!

[mykepredko]

The Tesla short sellers have been doing everything they can including fake announcements, generating rumours and harassing employees, suppliers and investors in order to hurt the share price of Tesla are now upset that Mr. Musk has said enough is enough?

Re:Ha! Ha!

[rahvin112]

Musk should do what any good CEO does and stop worrying about the day to day stock price. If he focused on simply executing in the end the short sellers will get their just desert.

What troubles me more though is that he hasn't filed an SEC complaint, there is something going on with Tesla stock with connected people trying to manipulate the price through placed new stories. The SEC should be investigating this as it represents a serious long term threat to the markets and with a complaint filed by Musk they would have the authority to begin an investigation.

Re:Ha! Ha!

[mvdwege]

Musk should do what any good CEO does and stop worrying about the day to day stock price.

What do you think going private is?

Stock Market, How do they work?

[hwihyw]

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...

Re:Stock Market, How do they work?

[deviated_prevert]

Yes, but not when you have ppl like Chanos who is manipulating the market.

Wash your mouth out with soap, you liberal democrat hippy regulatory evangelist! GREED IS GOOD short sellers are doing GODS WORK!!! The crash of 2008 was good for America, it put more money in the hands of the righteous, as did Saint Donald when he went bankrupt buying casinos. The number of individuals who got rich off his casino buying spree is rivaled only by the buying spree of the first sainted American organized crime sock puppet, Howard Hughes. Learn how the financial system actually works before you criticize the leadership!

Re:Stock Market, How do they work?

[hwihyw]

The crash of 2008 was good for America, unless you wanted overpriced homes, overpriced rents, and overpriced stocks. But don't worry, we have reinflated the housing and stock market bubbles. Enjoy paying $2000/month for a studio apartment and buying overpriced stocks that drop by 50% after you bought them.

Re: Stock Market, How do they work?

[magarity]

And vultures play an important role in the ecosystem. They just don't expect anyone to like them.

Short sellers are more like those gangs of monkeys who attack people and steal their cameras and stuff.

There's a ton of laws to protect big investors

[rsilvergun]

they're basically our ruling class. Things you wouldn't think in a million years have laws do. And those laws have teeth and they are enforced. It's good to be the king.

Ya gotta love it!

[Arivor]

Just can't stop thinking about how this played out... Musk: "I've been thinking about taking Tesla private" (yeah, if I could afford it.) andd... the stock price jumps for a bit and the short-sellers get thrown off. Ya know, every now and then we get dealt a really kick-ass hand and raise. Then that fool over there raises you and you're like "Yes!" next thing ya know you're all in. There was a reason they kept up with ya and you're left like... wtf Seriously? When you gamble even with the best hand you may just end up splitting the pot... Talk about some sore losers. Their like "What? You bluffed and we folded... Nope, nope we want our money back!" what a joke.

Re:Ya gotta love it!

[SCVonSteroids]

When you gamble even with the best hand you may just end up splitting the pot...

No. If you have the best hand, you have the best hand. There is no splitting.
At that point the gambling is mostly gone, too. You'd best focus on maximizing investment.

Re:Ya gotta love it!

[Arivor]

At that point the gambling is mostly gone, too.

Interesting, I suppose if you take it to mean the hand that wins, then any hand could be considered the best if it wins. That's not what I'm talking about, that would not even make sense in the context of how that could possibly relate to this scenario. During game play and when you're either limping in, raising, checking or folding based on what cards you hold. It's easy to see if you have what would be considered the best hand (in hold'em) and raise heavily... except there are two others with basically the same best hand. Then you end up splitting it three ways and I have often been a party to just that.

I had no idea anyone could jump to that conclusion on the simple basis that "At that point the gambling is mostly gone, too." makes it irrelevant. Saying the best hand is the one that wins, is such an obvious given at the end... It never even crossed my mind that anyone would not understand that the entire comment was to be taken as a single context. The way you saw it, doesn't make sense at all and most can at least maintain a sense continuity. It just makes everything flow together, rather than just throwing in a statement that is only relatable in stretch.

So, thank you for stating the obvious for me and I will try to do something about things that people find confusing. Though, I have no clue on exactly just how... Perhaps you can offer a better way of getting my intended meaning out a bit more clearly.

Re:Ya gotta love it!

[SCVonSteroids]

What are you on about?

There are ways to identify during the hand if you have the nuts. Of course whoever wins the pot has the best hand because all other hands aren't in play... That's what happens if you bluff someone out who had a better hand than you. Otherwise you weren't bluffing, you were value betting.

When you gamble even with the best hand you may just end up splitting the pot

This is what I'm correcting directly. If you have the best hands (the nuts) you're no longer gambling, but trying maximizing your return on that hand.
It's simple, really. My poker is a little dusty, but I'm convinced you're the one who fails to understand how the way you worded it makes no sense.

Denied a giant target.

[RyanFenton]

There's this big obvious income source coming for the company, an expensive factory being made that will make the next technology that everyone wants.

Without a disinformation campaign, folks would see that income source, and trade to match expected values, tempered for obvious risks, like failure rates and competition.

So, how do you turn this big, obvious market event in your favor?

You spread as much garbage about the company as you can. Headlines - headlines everywhere about everything you can get anyone to believe, that the company is fated for a giant fall. Get those stocks to as low a value as you can - then buy them, just before the actual numbers come back about a factory doing what a factory does.

So... the guy in charge of said factory decides to make the thing private, to prevent your strategy from working! Aw! All that work trashing the company, and you can't benefit from it! Such a loss of potential!

That's the market, as it is currently allowed to function. Folks using every piece of information as pivots to fool other investors.

The same thing is happening with Square Enix - about to release like 5 major games after working several years on each, and just releasing another major game now. What do the stories say about this, just before?

https://wccftech.com/square-en...

That's right - they emphasize the losses from making those games. They want those values low, low, low.

It's kind of a stupid way to value things, isn't it?

Ryan Fenton

Re:Denied a giant target.

[bobbutts]

There's nothing low about Tesla's valuation. It's highly inflated based on hopes that they'll eventually be a leader in a rapid growth market. I think short sellers are attracted because it's not clear Tesla will be able to achieve all the things needed to become profitable enough to justify the price. In other words, there's still much for Tesla to accomplish and people are divided about how profitable they'll eventually become.

Re: Denied a giant target.

[reanjr]

I think you need to learn about capital expenditures.

You can start here: https://en.m.wikipedia.org/wik...

Re: Denied a giant target.

[laird]

From what I can see, Tesla makes significant profit on every unit sold. They're "losing money" because they're not simply running a fixed operation, but are investing massive capital in expanding capacity to ramp up the volume at which it sells those cars. If they are successful in ramping up sales to the volumes they're investing to be capable of producing, their high profit margin per car will more than pay back the capital investment.

Re:Denied a giant target.

[jareth-0205]

...which is all great but you have ignored the fundamental central thing, which is that Musk has made an announcement that seems deliberately intended to affected the stock price (why else... why make something more expensive for yourself). If he doesn't go through with it he will have made a false statement, deliberately to affect stock price. That can get you in trouble.

Re: Denied a giant target.

[iggymanz]

the big analysts don't see a way to profit though, even with those expenditures.

Neither does Musk, by the way, evidenced by that tweet.

Re:Denied a giant target.

[stoatwblr]

"I think short sellers are attracted because it's not clear Tesla will be able to achieve all the things needed to become profitable enough to justify the price"

That's a legitimate reason to short - and an honest reason why shorters are needed in the market.

HOWEVER: When you then start issuing a barrage of press releases with highly questionable analyses intended to bolster that position and _cause_ investor flight, you're engaging in reverse pump and dump activities, even if you disclose that you have a financial interest in the company in question.

At that point the shorting crosses the line from "legal and legitimate" to "illegal market manipulation"

To compound that criminality by attempting to sue the company for striking back is the kind of thing that gets SEC (and other regulatory bodies') attention.

This is going to get interesting in a "Be very careful what you wish for" way.

Re:Denied a giant target.

[stoatwblr]

The funny thing about stock prices is that once issued and paid for, their further lives have zero to do with the company in question except when it comes to dividend payouts.

They can go up or down or negative, but the company doesn't see a dime of that - It's only the cash taken in at issue value that matters.

Almost all the people investing in Tesla know that Tesla is a long-odds gamble, but it's the kind of long-odds gamble they want to suceed. It's a market disruptor with the potential to shake up not only the entire automobile manufacturing industry but several other industries too - and one of the primary reasons the _OTHER_ automakers would like to see it go down is that Telsa had the foresight to ensure its battery and magnet raw material supplies for the next 20-50 years, which has left every other maker scrambling for the scraps. I wouldn't be surprised to see them buried amongst the backers of the shorters.

Whilst all the fuss is about cars right now, remember that whilst Tesla is concentrating on those at the moment, they're not Tesla's primary long term business - making energy storage systems is, whether those are wrapped in 4 wheels or (far more profitably) buffering the output of windfarms(*) or grid systems such as South Australia.

(*) It's pretty clear that intermittent sources have a massive destabilising effect on established grids despite being a minor supply factor and sooner or later governments are going to have to legislate that all such systems incorporate South Australian style output buffers or face the prospect of repeated unpredictable blackouts (the second large SA blackout happened because the OCGT plant operators declined to fire up their backup generators, citing an incoming weather front that would result in them not making enough money to cover the startup costs of the generators, let alone running them for 4-5 hours. This is the reality of a "more renewables" world when you go about it in a half-arsed manner)

Re:Denied a giant target.

[djinn6]

Telsa had the foresight to ensure its battery and magnet raw material supplies for the next 20-50 years

50 years is a long time. Given battery improvements are happening constantly, Li-ion may not necessarily be the best chemistry for the next 50 years.

As an investor, that's just another risk that should ideally be factored into the price. But since most independent Tesla investors are the ideological sort and will probably continue to support it even in the case of stock dilution, those kind of risks are being ignored.

Re:Denied a giant target.

[stoatwblr]

"50 years is a long time. Given battery improvements are happening constantly, Li-ion may not necessarily be the best chemistry for the next 50 years. "

Quite, but factor in that the lithium part of Li-ion is a minor part of the entire equation(*) and the "next big thing" is likely to be sodium-ion which uses more-or-less the same raw materials(**)

(*) It's also easy to get hold of, any potash operation has mountains going spare and if the price spikes 25% it's economic to extract from sewater.
(**) Sodium's even cheaper and even more readily obtainable, but as with lithium, it's not the sodium that's the issue.

What Tesla's locked in is supplies of the more important materials - cobalt and rare earths in particular

I'm glad you brought up the issue of ideological investors - these are relatively immune to the kind of scare tactics that the dump'n'pumpers have been using to try and short Tesla, which explains a lot about why they've become increasingly frantic and obvious in their attempts to avoid being wiped out as Tesla stocks stubbornly refuse to fall.

Personally I think that the battery market alone is big enough to justify the investments. Cars is probably a break-even proposition at best, given the long-term history of the big automakers and "renewables" electricity generation is likely to keel over once molten salt nuclear finally gets rolling out (and it has to get rollling out, as even with the best will in the world, whilst renewables can just about replace carbon emitting electricity generation worldwide, they can't ramp up to also replace carbon-emitting heating, transportation and industrial processes, let alone the increases in capacity required in developing countries. There simply isn't enough energy available to extract to do that sustainably), Batteries are going to needed a lot more than they are now, for a wide variety of purposes. Peaking plants and transportation are two of the primary ones.

If you're wrong, can I have a dollar?

[mykepredko]

I've given up trying to keep track of how many times I've seen the Musk haters say "Musk has screwed the pooch this time", "Musk has yet again promised and not delivered" or "Musk doesn't know what he's talking about" only to be proven wrong. If you're so sure that Musk does not have have a plan with investors lined up and has made the announcement without talking to tax attorneys and has placed himself in legal jeopardy could you put your money where your mouth is?

Re:If you're wrong, can I have a dollar?

[WindBourne]

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.

Re:If you're wrong, can I have a dollar?

[serviscope_minor]

I've given up trying to keep track of how many times I've seen the Musk haters say "Musk has screwed the pooch this time",

Maybe Tesla is the new Apple. At one point the joke was: "Apple: Going out of business since 1976." because of all the prophecies of doom. Seems t obe pretty similar with Tesla too.

Re:If you're wrong, can I have a dollar?

[RhettLivingston]

I can see that. We forget how long things can take.

In relation to Apple, Tesla is right around 1990 or so now. There is a long ways to go. The same slogan could easily be in place in another decade. But, watch out 28 years from now. Perhaps the first $10 trillion company?

Re:If you're wrong, can I have a dollar?

[Anonymous Coward]

If they put their money in, you'll just dismiss them as a financially motivated "short".

There is no way to critise musk nor Tesla that the fanboys don't have an immediate idealogically motivated way to dismiss.

Re: If you're wrong, can I have a dollar?

[Anonymous Coward]

If you think Musk is actually innovative, then you're an idiot. If you think he's less evil than any other billionaire capitalist then you're naive.

Re:If you're wrong, can I have a dollar?

[aquacrayfish]

If you're so sure that Musk does not have have a plan with investors lined up and has made the announcement without talking to tax attorneys and has placed himself in legal jeopardy could you put your money where your mouth is?

I'm pretty sure that's how this story started, with the people shorting stock that lost money being upset. I routinely bet on his endeavors, so, sure, I'm up for another round.

Re:If you're wrong, can I have a dollar?

[fatwilbur]

I've given up keeping track of how many glowing reviews and rose-colored analyses of Telsa and Musk I see on here. Seriously, I have very little personal care or interest in Tesla, ultimately to me they're just another company and care manufacturer. Often browsing slashdot anonymously/quickly and only looking at +4/5 comments, the only comments that ever get modded that high are ones praising or defending Musk/Tesla and point out why these "trolls" are wrong. They have a common theme that there's some mass of folks trying to keep Tesla down by all means.

Maybe if you're constantly, obsessively following Tesla investor spheres every day you might be locked in some good online battles with trolls, but just so you know to the average little-interest-in-Tesla reader, all of the news and comments seem irrationally exuberant. Objective fist look would seem to say the stock price/market cap aligns with that.. all of the news is exceedingly positive, perhaps some of the people all the +5 posters are calling trolls have valid opinions, they just don't jive with your financial interests??

Real reason Musk was forced to goose stock price

[JoeyRox]

Musk has to keep the price above $360/share, otherwise he has to pay back bondholders $960M in cash by March 1st, 2019. Based on its current cash position and expected expenditures Tesla wont have the funds to pay bondholders back.

https://seekingalpha.com/article/4196101-elon-musk-desperately-needs-tesla-stock-stay-360

Re:If I cried to a casino they gave me a losing ha

[WindBourne]

As long as they got your money, they would be happy to keep you around.

Re:Musk should be facing SEC action without a doub

[TomGreenhaw]

he said he had secured financing for going private

he hasn't

What makes you think he has not? There are a lot of powerful people who want to help and hurt Tesla. Its a lot of money, but I have no doubt that there are people eager to get in on a potential bonanza of a privately held successful Tesla.

He was already facing SEC action, but I'm confident he'll be exonerated.

Re: Musk should be facing SEC action without a dou

[WindBourne]

he has to get the board and our approval for that. We stockholders DO have a say.

What next? Sue a casino?

[loonycyborg]

Trading was always sort of gamble, any deterministic outcomes consistently are prosecuted as "insider trading". Lots of silly stuff affect stock prices and we can't expect people like Musk to be constantly self-conscious about affecting stock price in any way. I don't think forbidding Musk to share his plan to go private is in any way consistent with rule of law.

Re:What next? Sue a casino?

[Anonymous Coward]

Exactly, I bought 135 shares of Tesla, I could have bought a lot more (400+ more) but I stopped at the point of what I could afford to lose.

If every share went to $0 value I would still survive. Yet, at one point in time I was able to buy 500+ shares at $189 - Today I would be sitting very pretty indeed.

But while I was sure about Tesla, there are external forces which they had no control over, buying those 500 shares when I could not afford for them to crash would have been stupid.

There are ways to protect oneself on the stock market but there is NO SURE THING!

E.C.P.

Re:Short selling is difficult to regulate gambling

[iggymanz]

So you are just ignorant.

It is no more "high stakes gambling" than going long.

Not "antics" any more than buy stocks is.

Short selling benefits overpriced items in market, brings price down to where investors can buy them.

Re:Musk should be facing SEC action without a doub

[Mr D from 63]

what proof do you have that he did not secure funding? The fact that you are posting as an AC indicates that you have the veracity of Chanos or many others here.

What proof do you have he did? As of now, of course none of us know. There are serious doubts because evidently his board wasn't even aware and nobody seems to have a clue who the investors are, and Musk isn't saying who they are. This is a huge amount of funding for nobody to know about so there are legitimate questions. Proof isn't required of course to file a lawsuit, but it will be required one way or the other to resolve it.

The SEC will review and we'll find out. It may all turn out to be noise, but the fact that all this came down at all could have been avoided had Musk been a little smarter about what he tweeted and when. It was a blunder.

Doing Exactly What Musk Wanted Them To Do

[Bruce Perens]

In Musk's position, I would want to depose the short-sellers. Especially the ones behind a lot of the artificial bad publicity, and their business partners, etc. And now Musk gets to do that, without actually having to bring any suit against the shorts. At least, not yet. Once he has their depositions, maybe. Watch them attempt to avoid getting on the stand.

Re:Doing Exactly What Musk Wanted Them To Do

[Rockoon]

In Musk's position, I would want to depose the short-sellers.

If the shorters have the cash available to cover, then all Musk has done is made an even better shorting opportunity. On the other hand if Musk knew that the target(s) were already riding on the edge of ruin then it makes sense to give them a nice little push over the edge.

Re:Doing Exactly What Musk Wanted Them To Do

[SNRatio]

In Musk's position, I would want to depose the short-sellers. Especially the ones behind a lot of the artificial bad publicity, and their business partners, etc. And now Musk gets to do that, without actually having to bring any suit against the shorts. At least, not yet. Once he has their depositions, maybe. Watch them attempt to avoid getting on the stand.

Would that line of inquiry be allowed in this case? If so, why? I think all the short sellers have to do is establish their positions and their losses. Whether or not a particular shortseller tried to mislead/manipulate investors just isn't relevant to a suit about whether Musk misled/manipulated investors. If Musk's lawyers attempt to go in that direction I think they will just get told to pound sand.

Re: Doing Exactly What Musk Wanted Them To Do

[Bruce Perens]

Well if this case goes forward at all, I'll be using my Pacer account. I think the attorneys might make use of the Unclean Hands Doctrine. But I don't really know that much about it.

Re:If I cried to a casino they gave me a losing ha

[OzPeter]

I would be laughed out of town.

Unless you saw proof that they deliberately stacked the deck against you personally, and not Joe Schmoe sitting next to you.

(Which is the stance of the sort sellers - Not that I know if they have a valid point or not .. that's up to the relevant authorities)

Re:Musk should be facing SEC action without a doub

[WindBourne]

So, you are repeating what I am saying.
Yes, we do not know. However, there are 2 interesting links. First 16 banks said that Musk never approached them. The second one has Saudi Arabia saying that they were not interested.

Considering all of Musk Silicon valley billionaire friends, it still remains possible. But even I have to say, that this does NOT look good right now.

Wah wah...

[reanjr]

Short sellers need to man up and own their bad financial decisions. When I make a bad investment, I don't start looking for people to sue.

If you can't handle the stress of losing a short sale, stay the fuck away.

Re:Wah wah...

[Rockoon]

Advice for all investments, not just shorting.

There is a psychological tendency for short sellers to play for too high a stakes.

Unlike going long the full amount you have at risk is essentially every last dollar that you still havent thrown at shorting yet. This is true both when only 20% of your portfolio is short as well as when 100% of your portfolio is short. The maximum amount at risk is always everything, It is this fact that I think causes the psychological tendency to play for too high a stakes.

LMFAO!!!

[sentiblue]

Hahahaha... I think in modern regulations.. if the CEO and BoD of a company want to make import changes to their company, they need to get permissions from traders.... if it may cost the traders money, it will most likely be rejected.

Part of the Get Rich Scheme on Tesla

[psychic_bacon]

If I had more guts, I think this is part of what I would call a get rich scheme on Tesla. I see this same pattern, on Slashdot, the idea that Tesla does something, stock goes up, the short sellers put more pressure on Musk, then he snaps, the stock falls, then something good happens, and it goes up, etc. I bought a few shares of Tesla, mostly because I believe in electric cars, and always waited after some "Musk is crazy" news to do so, and each time, they jumped right afterward. This one might be a bit more dangerous though, because from what I've read, Musk might be in trouble here. He may be a genius, or may not, but smarter people than he have gotten too arrogant and slapped by laws, whether they're rational or not. The only saving grace I'm hoping for is that Musk is rational enough to know that any benefit he would get from a misleading or false announcement would soon disappear once it's obvious there is no financing. The stock would plummet, the shorts would be excited, and Musk may be in legal trouble.

Short selllers think they know more than anyone

[mschuyler]

and when it turns out they don't, they sue. Gamblers deserve their fate. They already gambled when they bought stock, then they gambled again by short selling. No sympathy.

Re: Musk should be facing SEC action without a dou

[reanjr]

Yes, because in the land of Oligarchia, only a dozen or so institutions are allowed to control the world through capitalization. No one else has any say, so it's sufficient to simply ask the oligarchs.

Not investors

[PPH]

Not in Tesla. They entered into no contractual or ownership position with Tesla/Musk and therefore have no recourse. They did enter into contracts with third parties willing to loan their Tesla shares. But unless these third parties had any influence on or inside knowledge of Musk's buy-back plans, they did nothing wrong either.

Play stupid games, win stupid prizes.

Re:Short selling is difficult to regulate gambling

[sjames]

By that logic, if I hack amazon and hold an unofficial but binding 90% off sale on everything, they will thank me?

short sellers are one of Elon's biggest backers

[reanjr]

If TSLA goes private, short sellers are going to be providing $20B of funding to help TSLA go private. All their positions will be closed and they won't be able to play the borrower's game anymore. It's odd that none of the stories trying to figure out where the money will come from seems to note this.

Re: Parasites

[reanjr]

You're an idiot. In a free market, you buy what you want, including short positions.

And short sellers (who don't try to manipulate the market) play an important role in providing market stability.

Re: Short selling is difficult to regulate gamblin

[reanjr]

Without short sellers, speculators pump the prices and then dump at profit. Short sellers - when competent - help fight pump and dumps by leveling the price movements.

That's the gist of it.

[Anonymous Coward]

That's basically it. Tesla is trading at over 11x book value: it has no profits, it's cash negative, it's ROE is a NEGATIVE 73%, it's debt to equity is over 243% - and keep in mind the debt has to be serviced, it's numbers are god awful!

And based upon the realities of the automarket and its energy business, there is no possiblity it could ever be profitable enough to justify its current share price.

That's it. It's not "hating" Tesla. It's just that many of us think Tesla is vastly overpriced and there has to be a correction.

But Musk takes that opinion as an insult: not as just a trade based upon market dynamics. And whenever one gets emotional about stocks, that's when you're headed towards ruin.

And looking at the option for Tesla, many many many Tesla longs have protective puts: they are in effect shorting the stock short-term. Very prudent I might add.

And aside from the fanboys and girls, the serious investors are concerned over Musk's behavior. If they get too spooked and start selling their millions and millions of shares, we'll see a huge crash that will make facebook's correction look like chump change.

Rest assured, I would expect a press release sometime Monday from Musk regarding the buyout announcement.

Re:If I cried to a casino they gave me a losing ha

[Anonymous Coward]

Last time I was in Vegas they gave me a winning hand.

The rest of the body was buried somewhere in the desert...

Re:Short selling is difficult to regulate gambling

[iggymanz]

No you will go to prison for theft.

Short sellers don't cause the mismanagement and underperformance that lead to price drop of shares.

Re: Short selling is difficult to regulate gamblin

[Fly Swatter]

That is great, but I was taught that two wrongs don't make a right. Then again if everyone was trustworthy there wouldn't be a stock market as it is today.

Short sellers aren't investors

[Anonymous Coward]

You aren't investing in a company when you're betting against it.

Re: Musk can borrow a lot of money

[that this is not und]

In the real world, unlike here in blogland, Musk is viewed based on his performance, not ideological dreams.

Unhappy Investors?

[kenwd0elq]

"Unhappy investors"? I'm not at all sure that short-sellers qualify as "investors".

"Pump and dump" tactics - buying a cheap stock, talking it up with false positive news stories and then selling it at a profit - are illegal. The reverse - selling a stock short and then making up lies about the company - should be equally illegal.

Re:Unhappy Investors?

[bidule]

"Pump and dump": all the money is upfront, you lose nothing more than what you invested. You might gain 10x what you invested.
Short-selling: you can lose 2-3 times what you invested.

One carries more risk than the other, which is why they're not equally illegal.

Re: It's been a few days.

[orlanz]

One, why did you post anon? You could have kept your history of being right if you are so sure about your opinion on Tesla.

And as a guy who does understand accounting and finance, Musk isn't anything special. He isn't as bad as the Enron & Worldcom guys. He is about where the CEOs of Ford, GM, and Delta were at various times over the last 4 decades. All were worse just before bankruptcy. All of them BS. That's part of their job. The problem is all the "analysts" who just believe their words without actual analysis.

Tesla's situation, accounting wise, isn't great but not horrible enough to have that much shorting. It's simply one of those mid-high risk to high return situations. If he almost goes private and the price point is within 5% or higher of what he tweeted; he is in the clear. He made the announcement on a public forum so no one got privileged information. He doesn't even need to actually go private, just get an offer near the price point.

Re:Short selling is difficult to regulate gambling

[sjames]

Nor do they fix anything but their own bank balance, much as in my scenario, I did not cause the security holes in the web platform, nor did I patch them.

Re: Short selling is difficult to regulate gambli

[reanjr]

What is the wrong for the short sellers? The pumpers push prices away from fair value. Short sellers correct it.

Saying two wrongs don't make a right is like saying police shouldn't use guns when going after violent criminals.

Agreed.

[Grog6]

Nothing like getting Bre'r Bear to throw you in the Briar Patch, lol.

"No! Please don't take me to court and make me prove you're lying publicly!

"Please No!" :)

Lol.

I'm sure this won't go to court, as this is the short sellers trying to make it go back down before the contracts expire, if they can.

Re: Musk should be facing SEC action without a dou

[WindBourne]

Well, at this time, I think that it is fair to say that there are not too many institutions with 82 Billion on hand. Or do you believe that there are loads of ppl and companies that have 82B in cash?

sorry but short sellers can go die

[cheekyboy]

All short sellers should go and take a hike
and piss off. They only serve themselves.
In China they would be executed.

Re:It's been a few days.

[cheekyboy]

Your investment doesnt even help Musk.
Your a looser investor.
You just like to profit of others work.
Do something useful for humanity, work.
Any bot/retard can buy shares.
You dont deserve to be rewarded for investing, go buy some T bills and enjoy. Your too rich, go back to the strip clubs.

In other news, prostitutes sue

[guacamole]

Prostitutes sue wealthy customers for the loss of virginity.

Re: Musk should be facing SEC action without a dou

[ShnowDoggie]

He only needs less than 1/2 of that amount. His share is around 20%. So take that off the top. The top five investors together are over 50%. (Do not quote me on that!) And he stated there will be a way to keep the current investors money. (Similar to what space x does). My guess is the *Most* that he will need is 41B and the least is 5B. Probably the final amount is a little above the middle of those two numbers.

Re: Musk should be facing SEC action without a dou

[DamnOregonian]

Or do you believe that there are loads of ppl and companies that have 82B in cash?

I no longer think you're an investor in Tesla at all. I think you're lying about it.
You seem completely ignorant of Tesla's supermajority voting rules, and the actual stakes that will have to be bought out.

Thought experiment

[ishmaelflood]

Person A has 100 shares of tesla, and sells 50 of them for $300

Person B has 0 shares of tesla, and sells 50 (takes a short position) at $300, on the same day.

The great god tweets some brainfart and the share price rises to $370

Why does person B think he is entitled to sue? If he is, then surely person A had just as much right to sue?

Creating shareholder value

[manu0601]

In other words, they want to sue CEO for creating shareholder value. That one will be difficult to play.

Last I check the burden of proof

[rsilvergun]

is still on the Government, even for securities fraud (drug charges are about the only place where the gov't can put the burden of proof on you). Given the amounts of money involved it wouldn't be hard for Musk to prove he _believed_ he had the money.

Re: Musk should be facing SEC action without a dou

[CaffeinatedBacon]

What proof do you have that he did?
You just have the bias ranting of a Musk lover.

Re: Musk should be facing SEC action without a do

[CaffeinatedBacon]

China has lots of money, plus he's opening a factory there. Maybe they would like to own a/(part of) an electric car company. They are pushing electric cars quite heavily.

Re:Short selling is difficult to regulate gambling

[iggymanz]

They fix market overvalue, and provide more sane investors proper entry price. They do no wrong, are not doing something immoral. You should instead direct your ire at those that hype stocks beyond their value.

Re: Parasites

[reanjr]

If you think short sellers as a rule engage in market manipulation, perhaps you've watched a few too many Hollywood movies about Wall Street's worst actors.

I don't have the time or inclination to correct all the fallacies you hold about market dynamics.

Re: Parasites

[reanjr]

The parenthetical in my comment was a clarification of which short sellers I was referring to, not a description of how short selling works.

Re: short sellers are one of Elon's biggest backer

[reanjr]

Was not familiar, so I looked it up: https://www.nytimes.com/2008/1...

Re: Musk should be facing SEC action without a do

[reanjr]

Not to mention the $20B in short interest that will get closed out in a private sale.

Shorts aren't investors

[GreatDrok]

The shorts have borrowed shares and sold them. Their problem is they have to buy them back to return them and they were hoping the price would go down so they could pocket the difference. This isn't investment, it is parasitism. They gambled and the share price hasn't gone down, that's life.

Share prices rise and fall on all sorts of information and I don't think Musk would have said what he did without having the finance secured and his tweet was to alert all of his actual investors of what he was planning. Shorts aren't in on this, they don't have any shares.

Re:Short selling is difficult to regulate gambling

[sjames]

How do they fix market overvalue? When they borrow and sell shares, they sell at current market value (otherwise, there's nothing in it for them). In many cases, they do a sort of reverse pump and dump, call it a "dump and dis" if you will. Anything beyond that is rationalization.

Their success requires either a successful "dump and dis" or predicting a market correction that is already going to happen with or without them. In the former case, they don't care if the stock was actually overvalued as long as they can create the temporary belief that it was overvalued. In the latter, they don't contribute, they just profit off of anyone who didn't get the memo.

Re:Real reason Musk was forced to goose stock pric

[GrimSavant]

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.

good riddance

[Tom]

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.

Re:Real reason Musk was forced to goose stock pric

[Rockoon]

Very few days over the past year has TSLA been above $360, so the way you have said it, it sounds like you are full of shit.

Are you sure you didnt mean to say something different? If not, why didnt you say what you meant?

Either very sloppy or very dishonest. Does it matter which you are?

So the price shot up, then came back down...

[ayesnymous]

The shorts weren't worse off than before the tweet... unless they were short so much that they got a margin call before the price came back down, in which case they deserve to lose for having such a massive position.

Re: Short selling is difficult to regulate gamblin

[sjames]

Of course, simply announcing that you think it's full of holes would do the same thing without fleecing everyone you sold the borrowed stock to at full current price (that you honestly believe is way too high).

Re:Short selling is difficult to regulate gambling

[sjames]

Actually, I just don't tend to buy into hand waving. Which is all I have ever seen to explain why short selling is a good thing. If you could explain it, you would have.

Re: Musk should be facing SEC action without a do

[CaffeinatedBacon]

There is no such thing as "China".

Over a billion people would disagree...

Re:Short selling is difficult to regulate gambling

[sjames]

Except that the thing that triggers people to short need not have any connection to reality. You short a stick if you believe that market PERCEPTION might change. Including, in many cases, the belief that if you say enough bad things, you can shift the perception.

A sell recommendation, OTOH is a signal.

For an example, based on current conditions, one might think I should short bitcoin. But I'm not stupid enough to do that, not because I believe it is valued correctly, but because I believe people will continue ober-valuing it for the foreseeable future. OTOH, if I believe that it is fundamentally sound BUT that the idiots in the market will soon panic over nothing, it's a great time to short.

That's the crux of the problem. People short based on what they think the market will do, not based on what it should do (even in their own humble opinion). At least if they don't want to lose money.

Just to top it off, if they take a big enough short position, they can cause a dip in the market followed by a bounce when they exit their position.

Privately owned cars

[Qbertino]

An entrenched market ripe for disruption. I totally believe musk when he says that car business is hell. I'm wondering if he regrets not going for something different like electric scooters or total robot cars or some entirely new market. ... Anyhow, I sure hope he succeeds!

fishy business

[izzo nizzo]

The ambiguity of these insider trading laws has gotten so intense that it reminds me of the intellectual property situation that software has been in (which fortunately has been somewhat figured out by the patent office this decade). I understand why manipulating markets is not allowed, but if it turns out that Musk did something wrong by giving people *more* information, I think I'll be pretty fed up.

On top of that, the premise that he is being sued by short sellers ought to negate any standing they would have to be an aggrieved party. It's bad enough that companies can be sued for not making their stock go up, but to also have them be sued for making it not go down is not tenable.

Re:Real reason Musk was forced to goose stock pric

[JoeyRox]

Nothing you wrote contracts what's stated in the article so I'm not sure what point you're trying to get at. The purpose of having the shares about $360 at conversion time is so the bondholders convert to equity rather than demand payment, which allows Tesla to issue new shares as part of an offering rather than having to deliver cash. The bondholders can then immediately liquidate their shares on the open market and pocket the difference vs the implicit $360 collar of their conversion price. In other words, it becomes a stealth secondary offering for Tesla, which is much less harmful to them than having to do an official secondary offering.

Re:Real reason Musk was forced to goose stock pric

[JoeyRox]

Your post doesn't make any sense, sorry. The purpose of announcing the private offering is to get the price above where it's been trading. Try restating your argument, this time with more logic and less pointless anger.

Re:Presumption of guild if they're called Musk?

[Cederic]

Fortunately we don't need to. Kalfman Isaacs has picked up that task.

Not investors (of Tesla)

[aliquis]

Well. They weren't investors of Tesla.
You invest on something expecting a return. Since shorting a stock mean to have a sold position of it they weren't Tesla investors.
They were speculators. Speculating in a falling price. And they may be wrong. Which happens .

I had to make this post unnecessary complicated because while not investors in Tesla they may be seen as investors in a product which give you a return if Tesla performs badly.

As for whatever he did would be illegal. He's warning ahead it seem. I don't know but I kinda would assume not. But yeah he got them good.

mountains

[nten]

Public communication can move mountains of cash. Just because most of us use it trivially, does not mean it cannot have real power.

Hyenas

[mapkinase]

You know that they are necessary part of the ecosystem, but every time I watch them getting their asses royally kicked on National Geographics channel, I am having a fit of a Schadenfreude.

Re:Short selling is difficult to regulate gambling

[iggymanz]

Not hand waving at all, the principles are simple

You just have a juvenile jealousy of someone making money on a beneficial market mechanism you don't understand. Educate yourself.

Re:Short selling is difficult to regulate gambling

[sjames]

Actually you broke it. People who short based on reality (as they see it) rather than what they figure a panic and delusion driven market will do tend to go broke.

Re:Short selling is difficult to regulate gambling

[sjames]

AAAANNND, more hand waving just happened.

Word of the Day: Fiduciary

[Macdude]

If Musk is even considering taking the company private (and discussing it with banks is a pretty good proof that his is) he has a fiduciary duty to tell the shareholders about it. The short-sellers don't have a case.

Re:You are a dunce

[stoatwblr]

Jim Chanos wasn't reverse pump'n'dumping Enron.

These guys are.

Re:Real reason Musk was forced to goose stock pric

[stoatwblr]

It's hardly surprising that the article was written like that.

Seeking Alpha is one of the leading pump'n'dumpers behind the Tesla shorting mess.

Short sellers are not "investors"

[thomn8r]

They're gamblers. Period.

This feels like an article from The Onion

[Pezbian]

Actually, it reminds me more of a cartoon. Aqua Teen Hunger Force - The Meat Zone

Meatwad ends up being able to predict the future and, after a request from Master Shake, correctly predicts the winning lottery numbers 1, 2, 3, 4, 5, 6, 7 but Master Shake chose different numbers despite this and gets angry.

https://www.youtube.com/watch?...

Re:You are a dunce

[Tom]

Short selling is more risky/rewarding, which is why you can make more money in a shorter time and also why it is preferred by people who see the stock exchange as a casino. Nobody I know or ever heard of is using shorting as a long-term investment strategy.

In principle, both long and short are perfectly valid strategies. But due to their different natures, they attract different kinds of players.

I have no doubt that there are good people with honest intentions in that game as well. Just like there are crooks on the other side. In general, however, you will find investors in the long game and gamblers in the short game.

But of course I have no idea what I'm talking about. I only worked as a broker for a relatively short time of my life.

Re:Real reason Musk was forced to goose stock pric

[GrimSavant]

The increased conversion rate I was talking about matters for fundamental changes to the company, which delisting and going private like Musk is discussing should include. If he is planning to go private in large part as a response to this particular $920M of debt, then the breakeven price for conversion is even lower, the $252.54 I mentioned, and on an earlier effective date than maturity the conversion is profitable above $252.54, not just $359.87, based on the table in 9.03(e).

If he is just goosing the stock to go above $360 so note holders convert and it reduces his debt load as you and the article are describing, then he can do that at least partially before the maturity date, since the notes can be converted at least a few days before maturity, and there is a 5 day measuring period. But the note holders are the ones who retain the option to convert if things continue as normally, so I'm not sure what the plan would be for goosing the price this many months out if Musk is just BSing about going private and can't maintain high enough prices longer than momentarily. However, $360 breakeven price in the initial note offering might not even be right anymore, the conversion rate is adjusted in section 9.04 based on changes to the stock pool such as splits or dividends. I haven't been following Tesla closely so I couldn't tell you if any of the 9.04 adjustments are relevant.

I don't disagree with the overall point that Tesla may have cashflow issues and potentially financing troubles, but Musk wanting to go private has bigger implications beyond him just goosing the price above $360. Also remember that what we are discussing is past debt based financing that is maturing next year, it would be hardly surprising if instead of paying that all off with cash Tesla just issued more debt. We're not currently in a financial meltdown like in 2008-2009 (fingers crossed), so I'm not sure it is a good idea to get lost in the weeds about converting debt into equity around the $360 per share price point, when the overall issue remains that he has almost a billion dollars in liabilities coming due March next year regardless and the markets should be well aware of that fact.

Re: Musk should be facing SEC action without a do

[CaffeinatedBacon]

Who said they were?
Want to borrow some smarty pants to cover your dumb ass?

Re: Musk should be facing SEC action without a do

[WindBourne]

Wrong. We own a few shares for our sons. We also have 10 kw solar City and 2013 model s -85. Big believer/supporter, but as to the stock, that was what our sons wanted, and I was not capable of reading technical stuff for most of the last decade. Iow, we bought it, but don't do much with it.

Re: Musk should be facing SEC action without a d

[WindBourne]

Slim to no chance of elon using Chinese money to buy Tesla. It would cost him the company.

Re: Musk should be facing SEC action without a do

[DamnOregonian]

Then you should try harder to inform yourself about corporate governance, and your rights as a shareholder in an LBO or MBO.
Nobody needs 82B in cash to make this happen, and you as a minority holder who will likely join in a minority disagreement to have your stocks converted to private stocks with shareholder agreements attached- really do need to know what's coming.
Frankly though- you'll do fine either way.
If you're forced to sell, you'll make an obscene profit, and if you're not, you'll have the option to- at an obscene profit.

Re: Musk should be facing SEC action without a d

[CaffeinatedBacon]

Is that with the same confidence you said this

I would be amazed if China comes first.

About the factory everyone told you would be in China...
Which turned out to then be in China.

Re:Short selling is difficult to regulate gambling

[iggymanz]

yes you are the one hand waving about a well understood mechanism. look it up.

Re:Short selling is difficult to regulate gambling

[sjames]

I'm not the one asserting some sort of benefit. I have looked it up, and I got more hand waving from cheerleaders.