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

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."

Comments

Well, it isn't unexpected.

[Mr. Dollar Ton]

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.

Re:Well, it isn't unexpected.

[Rei]

Slashdot article is wrong. It's only against Musk, not Tesla. As longs have been pointing out for ages that it would be, while shorts kept insisting it would be against Tesla. He's also not been charged, he's been sued, in a civil case. "Civil Action No. 1:18-cv-8865"

But come on people, get that price down! I've got dry powder and it's right before the Q3 deliveries numbers ;)

Re:Well, it isn't unexpected.

[lgw]

It's always also a sort of strange bewilderment on my part why you seem to think of Iceland as some sort of fictional place where nobody actually lives.

"It's fantasy, like Elves and Eskimos" - Homer Simpson

Re:Well, it isn't unexpected.

[Mr. Dollar Ton]

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.

Re:Well, it isn't unexpected.

[lgw]

I dunno, seems like he has a solid defense: "no reasonable person would believe anything I promise".

Re:Well, it isn't unexpected.

[LynnwoodRooster]

Given the Tesla burn rate, they need access to that capital in the next few months. They cannot let it drag on past November. Stock issues typically have 30 to 90 days requirements on announcement, meaning that if Telsa is burning capital at the rate it's been burning, they'll be out of cash around February 2019. So if they have a 90 day announcement period for more stock sales, they would need to announce by the end of October. Having yourself locked down at that time is basically a death sentence.

Re:Well, it isn't unexpected.

[RhettLivingston]

I'm honestly not sure how to play those delivery numbers now. I was fixing to jump in for the expected 10% plus jump (trader here, no long investments with a recession in the wind). But, I'm in the camp that believes that Tesla without Musk at the helm will be just another car company instead of a company headed for a full vertical stack business in Transportation as a Service that is the only thing that can justify it being amongst the highest valued companies. To be valued in the $50+ billion range at this point in its life can only be justified by an expectation of a value that is a multiple of the top car company in the world in the decade out time frame because values don't stay flat while the company grows to its target.

Without his dynamism, they may not fail, but they will only succeed in having sparked the transition to electric, not in the more far-reaching task of rewriting the automotive business model which likely has another 15 years to critical mass. He also badly needs a Tesla worth several times more than today to gain the finances he'll need for Mars at about that same 15 year time frame. He needs a Tesla providing a few hundred billion miles a year of TaaS.

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.

Many of the older, calmer investment experts I've read comment on this battle from the POV of experience say that the SEC will talk big but balance what they do to Musk with concern for their own potential of causing more damage than the momentary glitch Musk caused. 10% increases and decreases in Tesla are an expected norm. I personally consider the stock to be unchanged from a long-term POV as long as it stays between about 250 and 370. It is that volatile.

Re:Well, it isn't unexpected.

[LynnwoodRooster]

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.

Re:Well, it isn't unexpected.

[rtb61]

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.

Grand scheme of things

[nightfire-unique]

Wouldn't it be delicious if this derailed humanity's path to the stars long enough that we didn't make it as a species?

I honestly can't think of a worse group of folks than financial lawyers, or a better group of people than SpaceX.

So

[nightfire-unique]

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.

Well, this will drive down the stock price.

[cyn1c77]

Maybe the SEC should sue itself too?

Re:I saw the update half done

[mlyle]

No, dipshit.

  Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. 78j(b)] and Rule 10b-5 [17 C.F.R. 240.10b-5] thereunder.

In no place does it say 240.10b-5(b).