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SEC Sends Subpoena To Tesla In Probe Over Musk's Take-Private Tweets (bloomberg.com)

Posted by BeauHD on from the serious-business dept.

The U.S. Securities and Exchange Commission sent Tesla a subpoena regarding Elon Musk's effort to take the company private, "indicating the regulatory scrutiny of his statements have reached a more serious stage," reports Bloomberg. Last week, Musk tweeted he was considering taking Tesla off the market and had "funding secured" for the deal. From the report: Musk exposed himself to legal risk by tweeting Aug. 7 that he had the funding for a buyout. Almost a week later, the chief executive officer said the basis for his statement was conversations with Saudi Arabia's Public Investment Fund, which first expressed interest in helping take the company private in early 2017. Tesla's board has since clarified that it hasn't received a formal proposal from Musk, who's also chairman, nor has it concluded whether going private would be advisable or feasible. Tesla may face potential regulatory challenges beyond the SEC investigation. The company probably will need approval of U.S. national security officials if Saudi Arabia finances the effort to take the company private, and President Donald Trump's administration has been stepping up scrutiny of foreign investment in American technology.

19 of 273 comments (clear)

  1. Musk sent out pair of shorts to a short trader by JoeyRox · · Score: 5, Funny

    That trader should return the favor and send Musk a pair of handcuffs.

  2. Didn't I tell you? by PopeRatzo · · Score: 3, Informative

    I'm not one to say, "I told you so", but if you look at the comments from when this story first came out, you will see I commented that his obvious attempt to manipulate stock price could get him in serious trouble with the SEC. A long thread of Musk fans and the Anonymous Coward telling me that was nonsense and nothing Musk did was improper followed. Matter of fact, the thread is still active with back-benchers arguing with me about how Musk doesn't need to do any of this because he's a billionaire and really doesn't care about the stock price of Tesla.

    Well...

    https://youtu.be/9AajslFuPro

    Here is the thread. I told you so.

    https://slashdot.org/comments....

    --
    You are welcome on my lawn.
    1. Re:Didn't I tell you? by PopeRatzo · · Score: 4, Insightful

      Being asked for information when the public is wringing their hands, as you are, is not "serious trouble."

      A subpoena is not "asking". It is demanding, and to get one you have to convince a judge that there is probable cause. You can consider it a search warrant, except for documents, testimony and information instead of physical evidence.

      --
      You are welcome on my lawn.
    2. Re:Didn't I tell you? by PopeRatzo · · Score: 4, Funny

      Also, you used the phrase "back-bencher," but you don't seem to comprehend the meaning. It means you. Not just them.

      Bitch, here on Slashdot, I am the very definition of a front-bencher. I got a motherfucking bench down in front all to myself. It's possible that nobody wants to sit near me, but nonetheless, the bench is in front. I'm like goddamn Jack Nicholson at a Lakers game up in here.

      --
      You are welcome on my lawn.
    3. Re:Didn't I tell you? by Train0987 · · Score: 5, Informative

      Couple things:

      The SEC has their own subpoena powers. No judge necessary. Companies agree to comply as part of the process of going public.

      The SEC only has civil jurisdiction, not criminal. The only thing the SEC can do is levy fines and bar company officers from being officers. The DOJ (FBI) will have to get involved for indictments to happen.

    4. Re:Didn't I tell you? by Train0987 · · Score: 4, Interesting

      Not true. The SEC initiates formal investigations by issuing what's called a Well's Notice to a company. These are not public and companies aren't necessarily obligated to report receiving one. There is some debate on whether its legal for a company to sell more stock without disclosing a Wells Notice, however. There was some suspicion that Tesla already received one looking into the truthfulness of past production/financial guidance claims.and how that would adversely effect their ability to raise more capital (that they desperately need) - it would also explain Musk losing his mind lately. Disclosing the existence of a Wells Notice obviously hurts a stock's price. Actual subpoena's usually mean the company is not complying with the requests outlined in a Well's Notice.

      I'm not sure if the reports of a "subpoena" in the buyout tweet case refers to a Wells Notice or actual subpoenas. That is yet to be seen. I believe they would have to disclose subpoenas as a material event in an 8K.

    5. Re:Didn't I tell you? by ErikTheRed · · Score: 4, Interesting

      Musk made a fraudulent tweet to manipulate his stock price. It's both illegal and unethical. Now imagine if, say, an oil company executive pulled this shit. The exact same people who are defending Musk would be screeching for the oil company exec's immediate imprisonment and being fined into starvation.

      Welcome to 2018, where facts don't matter and right vs. wrong are a function of political correctness. Enjoy your stay.

      --

      Help save the critically endangered Blue Iguana
    6. Re:Didn't I tell you? by Hognoxious · · Score: 4, Funny

      what's called a Well's Notice [...] disclosing a Wells Notice [...] existence of a Wells Notice [...] outlined in a Well's Notice [...] refers to a Wells Notice

      Protip: if you don't know whether the apostrophe should be there, just go 50:50.

      --
      Confucius say, "Find worm in apple - bad. Find half a worm - worse."
    7. Re:Didn't I tell you? by gman003 · · Score: 4, Informative

      A subpoena is one step below a warrant, and one does not generally have to convince a judge of anything to obtain one. They are often issued by the clerk of the court, or even by the lawyers themselves. Or, as in this case, it was directly issued by a federal agency.

      If one is served a subpoena that they believe is invalid, they must file a formal objection with the court. Simply ignoring a subpoena, even an improper one, is grounds for penalty.

      A warrant, in contrast, is an authorization by a judge or other "competent official" for an officer to perform an act that would otherwise be illegal, most frequently to arrest someone or to perform a search, but is also used for executions and myriad other things.

  3. In the age of Trump Tweets. . . by Idou · · Score: 5, Interesting

    This feels like a lifeguard going after kids for splashing. . . during a hurricane. . .

    However, I do agree with the Musk critics that say he should not be the CEO of a public company. . . that is why Tesla needs to go private.

    Let good engineers quietly build stuff (and occasionally vent on Twitter, without regulatory consequence) and the do-nothing CEO's of public companies continue do nothing and look good in the name of shareholder value.

    I just want to drive their cars. . . the rest just seems like a silly distraction.

    --
    Sdelat' Ameriku velikoy Snova!
    1. Re:In the age of Trump Tweets. . . by Aighearach · · Score: 4, Insightful

      There are so many different theories of what a CEO's behavior should be, it is pretty funny when critics talk about their own preference as if it might be the One True Way. It should be clear that there isn't any such thing.

      In other years, or with CEOs having a different name, it is often stated casually that part of their job is to spin everything that happens in the light that best boosts the stock price. And then if his name is Elon Musk, the same people freak out because he didn't file an 8-K, even though the rules are really clear and explicit that an 8-K filing would be needed after the company consummated a deal to privatize. That's how far the critics are from reality, generally. It is highly comical.

      Which is it, do you want CEOs to do nothing, or to do something? The stock price went up after his comments, because people believed them, and now it is a week later and we know that a deal is in fact being negotiated. That's verified. People want to chase him around with handcuffs over their narrow parsing of the word "secured," even though the standard for truth is not that every single possible dictionary definition of the word are all simultaneously true. In fact, if any of the common meanings of the word are true, then it is obviously true. People don't even remember the difference between truth and lies while they're chasing him with their imaginary handcuffs. And they certainly don't remember it while they're bloviating about how much they know about the job of a CEO. They don't even know that most companies would prefer to have a controversial CEO who can keep their company in the news! And if the public thinks he's some brilliant engineer, there is almost no way that it hurts the company; even all the nonsense of people chasing him with their imaginary handcuffs, it benefits Tesla immensely. They're a bigger part of the public mindspace than BMW or Mercedes Benz! Not only has he made his tiny car company the absolute center of public thought about his industry, he even has them associated with the engineering of fuckin' space ships! He's like, knocking it out of the park with a Galaxy-class performance as CEO, and the supposed "nerds" on slashdot are too busy sucking their own herpaderp to notice the difference between "I don't like him" and "he's doing a bad job."

    2. Re:In the age of Trump Tweets. . . by Train0987 · · Score: 3, Informative

      How the CEO of a publicly-traded company should act are not "theories". There are laws regulating it.

      A CEO is breaking the law if he makes false statements to manipulate his stock price. A.K.A. "Funding secured" (to burn the shorts). CEO's are also not allowed to buy or sell their own stock while privy to non-public material information. A.K.A. a buyout at 40% above the current price with funding secured.

      There are several other laws regulating behavior that officers of public companies must abide by but those two are pretty basic.

    3. Re:In the age of Trump Tweets. . . by Idou · · Score: 5, Insightful

      Well, I think in the end, this is a cultural war between those in the wealth creation business (Elon Musk/Tesla) and those in the wealth transfer business (Wall Street). As far as Wall Street is concerned, the public CEO is there to serve them. When a public CEO does not act accordingly, the entire industry goes out for blood.

      I have had Wall Street types find out I own a Tesla and go into some kind of rant of why the company is doomed, that "everyone I talk to is shorting them", and all their cars catch on fire. That is not normal "car" talk. That is crazy "they faked the moon landings" type shit. It is like the entire industry is acting like some kind of cult because a public CEO had the gall to stand up to them.

      That is why I think Tesla should go private. Not because Elon Musk is crazy, but because Wall Street is. . .

      --
      Sdelat' Ameriku velikoy Snova!
    4. Re:In the age of Trump Tweets. . . by Idou · · Score: 3, Informative

      You do realize that the entire basis for Wall Street (and capitalism) is that new, high growth wealth creation ideas initially require more funding than they can initially generate from their own operations, right? Ever heard the phrase, "it takes money to make money?" The vast majority of new forms of wealth creation require some form of initial "investment." Larger and longer periods of investment are correlated with higher expectations of growth and wealth creation.

      But, specifically, which party is gaining wealth at the expense of which party in Tesla's case? Keep in mind, if Tesla goes private at $420 a share, everyone who has ever bought long and held to that point will realize a significant return. Where did that wealth come from? It was created turning boring, commodity materials into the best car I have ever owned.

      --
      Sdelat' Ameriku velikoy Snova!
    5. Re:In the age of Trump Tweets. . . by Idou · · Score: 3, Insightful

      losing billions to sell thousands...

      Yes, and $4B x 4 is $12B/year. So they are losing billion to sell BILLIONS (not "thousands").

      Revenue growth is up - and so are costs, and the losses.

      Yes, sacrificing profitability to increase market share might sound crazy, but it is business as usual in . . . business. For Tesla, it is a small price to pay to start dominating an entire segment of the car market. . .>, and its marketcap would tend to agree. . .

      --
      Sdelat' Ameriku velikoy Snova!
  4. Bloomberg called it by mewsenews · · Score: 4, Informative

    Bloomberg ran an article titled Elon Musk's Funding for Tesla Wasn't So Secure where they pointed out when Musk said "funding is secured" there was no actual agreement in place. His statement being factually untrue risked causing this SEC investigation.

    1. Re:Bloomberg called it by ISayWeOnlyToBePolite · · Score: 3, Informative

      Bloomberg ran an article titled Elon Musk's Funding for Tesla Wasn't So Secure where they pointed out when Musk said "funding is secured" there was no actual agreement in place. His statement being factually untrue risked causing this SEC investigation.

      Per recent discussion concerning fake news, I'd mention that the article linked is an opinion pice by Matt Levine as noted in the headline and it comes with a disclaimer at the end. Imho it's a worthwhile read.

  5. Musk explains at greater length in a blog post by Michael+Woodhams · · Score: 4, Informative

    Here.

    Key points:
    * This had been discussed with the board before the announcement
    * The board agreed that the next step was to discuss with large shareholders.
    * It would be unfair for the big shareholders to know of this proposal but not the small shareholders, hence a public announcement. (It isn't clear to me whether the board specifically agreed to this announcement, or whether Musk felt it was a logical consequence of the previous point.)
    * "Funding secured" means the Saudi Arabian sovereign wealth fund has been eager to do this for quite some time, although Musk would like there to be other investors too.

    I feel somewhat but not completely reassured by this explanation.

    --
    Quattuor res in hoc mundo sanctae sunt: libri, liberi, libertas et liberalitas.
  6. Re:This is what happens when you enter the stock by Brett+Buck · · Score: 4, Insightful

    Well, sort of - but you went to the stock market to *get other people's money*, it's not at all unreasonable to expect them to have some say in how you conduct yourself.

          If you want to retain full control, as you say, don't take it public. You can't have your cake and eat it, too.