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SEC Charges Elon Musk With Fraud Over His Statements To Take Tesla Private (bloomberg.com)

Posted by msmash on from the breaking-news dept.

U.S. securities regulators have sued Elon Musk for allegedly making false statements related to his abandoned efforts to take Tesla Motors private. Bloomberg News broke the news Thursday, citing docket entry in Manhattan federal court. Last month, Musk had expressed his intentions to take Tesla private, and that he had secured the funding. Taking Tesla private, which would have helped the company avoid making short-term commitments and goals, would be the "best path forward," Musk had said at the time. Even as investors had shown agreement to Musk's move, a few days later, he announced that after further discussions, everyone believes that Tesla should remain public. Amid all of this, some argued that Musk made the "false" claim just to hurt short-sellers. From the lawsuit: This case involves a series of false and misleading statements made by Elon Musk, the Chief Executive Officer of Tesla, Inc. ("Tesla"), on August 7, 2018, regarding taking Tesla, a publicly traded company, private. Musk's statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock's then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote. In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source. During a press conference, Stephanie Avakian, co-director of the SEC's division of enforcement, said: A chairman and CEO of a public company has important responsibilities to shareholders. Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as a press release or an earnings call or through less formal methods such as Twitter or other social media. Neither celebrity status nor reputation as a technological innovator provide an exemption from the federal securities laws. In a statement to CNBC, Musk said, "This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."

12 of 412 comments (clear)

  1. Well, it isn't unexpected. by Mr.+Dollar+Ton · · Score: 5, Insightful

    It was probably more an act of stupidity under influence than a premeditated attempt at a short squeeze, but if you're wearing the CEO hat, you have less leeway for stupidity.

    So, fraud charges secured.

    1. Re:Well, it isn't unexpected. by Mr.+Dollar+Ton · · Score: 4, Insightful

      This is a very subtle distinction, as Mr. Musk is Tesla for all practical purposes - he's the face, the chief salesman and the chief reality distortion wizard there. Without him, Tesla, Inc. would have folded long ago.

      Also, it is quite possible that more charges will be filed. This is likely the first action, not the last. The outpour of executives in the last few weeks virtually guarantees it.

      I don't expect you to admit that Mr. Musk's behavior is utterly irresponsible, but that's what it is.

    2. Re:Well, it isn't unexpected. by jeff4747 · · Score: 3, Insightful

      Also, it is quite possible that more charges will be filed. This is likely the first action, not the last.

      You generally don't start with the smallest possible action when you are planning more than one.

    3. Re:Well, it isn't unexpected. by LynnwoodRooster · · Score: 4, Insightful

      The SEC has to be very careful here because in punishing Musk for a 10% increase that hurt a few minority shorts, they could spark a 50%+ decrease that would be of far greater total monetary harm to the majority longs.

      That's not the result of the SEC - that's the result of Musk's actions. Commit fraud, you get busted and probably removed from leadership of your company - which will probably tank the stock. That's entirely on Musk trying to be cool for his girlfriend ($420 - get it, 420!) and attack the shorts. The SEC isn't responsible for the harm for the longs - Musk is.

      --
      Browsing at +1 - no ACs, I ignore their posts. So refreshing!
    4. Re:Well, it isn't unexpected. by rtb61 · · Score: 4, Insightful

      Reality, a corrupt hedge fund, paid a corrupt lobbyist, to buy SEC action. CEO can tweet pretty much anything, it is not a company press release. Normal SEC role, would be to request a confirmation as a company press release (investors should pay far more attention to company press releases than to CEO tweets).

      As a company press release, you claim funding has been provided there better be there, as a CEO with a tweet, you claim funding is available, any one can provide that letter. So he goes to his favourite bank manager and asks for a letter saying they would have (heh heh) provided funding and the SEC looks as stupid as fuck. As a last ditch super lame effort, they claim the letter is after the action, as a retort, yeah, we did a verbal and a handshake (100% legally binding in the eyes of the court). The SEC, well, the particular stooge who fronted the case, might well lose their job because Tesla can counter claim that the only reason prosecution was brought was to actively seek to damage the share price to favour the shorts and well, demand an FBI investigation to find the lobbyists and the hedge fund manager doing the shorting.

      The SEC in this case is doing far more to try to damage the price of Tesla in favour of the hedge funds doing the shorting, on purpose, then Musk did with his tweet ie the SEC has launched a court case to specifically cripple Tesla share price affecting all investors compared to a fucking tweet only affecting hedge funds doing shorts and guess fucking what, protecting all other Tesla investors.

      So who is guilty of the greater stock price manipulation, Elon Musk or the SEC (the unknown lobbyist and hedge fund managers shorting the stock), obviously not Tesla, so guess who will have the case tossed and guess who will be facing major ramifications.

      --
      Chaos - everything, everywhere, everywhen
    5. Re:Well, it isn't unexpected. by Anonymous Coward · · Score: 3, Insightful

      CEO can tweet pretty much anything, it is not a company press release.

      From the complaint:

      On November 5, 2013, Tesla publicly filed a Form 8-K with the Commission stating that it intended to use Musk's Twitter account as a means of announcing material information to the public about Tesla and its products and services and has encouraged investors to review the information about Tesla published by Musk via his Twitter account.

      How do you like them apples?

  2. Who the hell cares if short sellers were screwed? by Trailer+Trash · · Score: 1, Insightful

    Seriously. They bring *nothing* to the table, and they're incentivized to shit on Tesla at every opportunity to keep the stock price down. I wish Musk would have taken it private just to spite them.

    --
    Do you have ESP?
  3. So by nightfire-unique · · Score: 5, Insightful

    On the one side, we have someone who could be humanity's best hope for escaping extinction.

    On the other side, we have a bunch of rich assholes trying gambling that he'll fail, and expecting to pull some money out of thin air if they're right.

    Part of me wants Elon to fail. We don't really deserve to spread our seed throughout the galaxy.

    --
    A government is a body of people notably ungoverned - AC
    1. Re:So by Spy+Handler · · Score: 3, Insightful

      On the one side, we have someone who could be humanity's best hope for escaping extinction.

      You fogot the part where Musk also absolves your sins and lead you to the kingdom of heaven.

      On the other side, we have a bunch of rich assholes trying gambling that he'll fail, and expecting to pull some money out of thin air if they're right.

      So rich assholes put a gun to his head and made him say "Funding secured"? Even though there was no such funding? It was an outright lie. Unless you're Bill Clinton and you wanna debate what the definition of "is" is.

      Musk brought all of this upon himself, 100 percent. He should've laid off the Ambien and LSD, and gotten some decent nights sleep.

    2. Re:So by iggymanz · · Score: 1, Insightful

      News for you. Musk is also a rich asshole. He doesn't have a plan for Tesla to become profitable, and lied about funding.

      He will not save humanity with the type of chemical rockets his company builds. those will not go to Mars.

  4. Well, this will drive down the stock price. by cyn1c77 · · Score: 4, Insightful

    Maybe the SEC should sue itself too?

  5. Re:Grand scheme of things by iggymanz · · Score: 1, Insightful

    get it out of your head. Musk's rockets will not be taking humanity to the stars or Mars, there is nothing innovative about their thrust or capacity. In fact, his rockets are bottle rockets next to a Saturn V's ability.

    Musk is not the savior of mankind, is not working on any tech that is revolutionary for space travel, and certainly not any useful for manned missions to any planet or moon.