Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Navin]

It's clearly escalation tactics: trying to force Elon to settle a second time. Pretty much the only option the SEC has left IMHO, the facts are against them and their legal arguments seem weak.

Except that I don't think they'll be able to force Elon to settle this time around. Contempt of court proceedings are 'risky' to Elon, but also mercifully accelerated - unless the judge wants it all to go slow that is. Still even in the worst case it should be over in months, not '~5 years' like the average civil lawsuit takes to resolve ...

Just a note of gratitude for your postings. In a sea on nonsense - u are a sea unicorn.

 

[scaesare]

Slightly OT but I could not think where I could post it...…..to brighten the day (in the face of SEC clouds)
View attachment 388025

Well, based on the silhouette in that pic, we now know Doc Brown's screen name here!

 

[Intl Professor]

Thanks to Google’d AI helper.

Karen Uhlenbeck, Uniter of Geometry and Analysis, Wins Abel Prize | Quanta Magazine

This is something to give lessor minds like mine a headache for trying to follow the mathematical narrative. But it ends with heartwarming tale of one of feminism’s better angels despite her beginnings.

“Mathematics research… is something you can work on in solitude, if you wish. In her early life, she said in 1997, ‘I regarded anything to do with people as being sort of a horrible profession.’”

As an “extinguished professor” of social science I marvel at her precocious social insight as well.

 

[Causalien]

Agree. The best revenge is served cold.

Elon, if you hear us, please take a temporary loss to win the war. Just lay low on communication aspect (Tesla or non-Tesla). You have an army of supporters who have invested their lives’ worth (a little dramatic but true is some cases). You don’t need to be vocal to get your message across.

(Anyone who can pass this on to Elon !! )

The previous settlement was appeasement to sec to save time and effort during the model3 ramp. We now know that if the court case were to go through, Elon would be distracted enough for tesla to fail. Cause the m3 ramp was just that brutal.

However, I doubt that doing the same thing again works as a strategy when the bully comes back for more. Now we see a pattern and must fight because the bully will come back for 3rd, 4th and infinite times.

Tge other argument is that the sec sees another quick 40 mil they can make. So it is a greedy cash grab. Since tesla have no political connections, nor connections to wallstreet it doesn't affect their future job prospects.

If democrates come into power, i wish elon spend sone time building out his political connections.

 

[Hock1]

I have this thought that I cannot refute by myself, so help me out...
What would happen if Tesla announced they are going to pay a symbolic dividend each positive quarter?
I believe this would cause all lent shares to be recalled every end of Q just so that shareholders can write down the profit.
I'd be more than happy with mere $0.01/share dividend and it would cost tesla less than $2M per Q.
If it would really cause shorties out every end of Q I'd say that is $2M well spent.

I cannot believe I'm the first one who thought about this so, where exactly am I wrong with this?

Cash dividends don't present a problem for the shorts, because they come up with whatever the amount is and pay it to the holders of the shares that have been shorted. It's called an "in lieu of dividend".

 

[SPadival]

I didnt see Hueston's letter to the judge regarding SEC's reply posted here.. Just in case:

SEC v Musk - Letter Asking for SurReply (Provided by Dan Ravicher).pdf

Among other things, Mr. Musk would like to address the SEC’s unsupported assertions and submit
documentation reflecting the negotiation history between the SEC and Mr. Musk and Tesla, which
undermines the newly-presented interpretation the SEC sets forth in its Reply.

In other words, got em by the balls.

 

[KarenRei]

I didnt see Hueston's letter to the judge regarding SEC's reply posted here.. Just in case:

SEC v Musk - Letter Asking for SurReply (Provided by Dan Ravicher).pdf



In other words, got em by the balls.

Not sure how applicable that phrase is to the SEC's supervisory assistant chief litigation counsel who's bringing the case (Cheryl Crumpton)

 

[Fact Checking]

I didnt see Hueston's letter to the judge regarding SEC's reply posted here.. Just in case:

SEC v Musk - Letter Asking for SurReply (Provided by Dan Ravicher).pdf



In other words, got em by the balls.

I wrote about it briefly, it scrolled off too quickly I guess - see the 'sur-reply' paragraph and discussion of their filing:

The SEC is trying to avoid an evidentiary hearing, because their own reading of the law and the settlement is that there's no need for the judge to take any extra evidence and context into account, their reading is effectively that Elon is guilty by default based on the text of the tweets. An evidentiary hearing would broaden the scope of the lawsuit and bring in constitutional arguments - which is absolutely not where the SEC wants to go.

Elon's lawyers almost immediately requested a sur-reply motion:

Docket for United States Securities and Exchange Commission v. Musk, 1:18-cv-08865 - CourtListener.com

LETTER MOTION for Leave to File Sur-Reply Memorandum addressed to Judge Alison J. Nathan from John C. Hueston dated March 18, 2019. Document filed by Elon Musk.(Hueston, John) (Entered: 03/18/2019)​

Note the almost immediate motion: Elon's lawyers were expecting this and were ready for this. Their (atypically long) motion was probably mostly written already, ready to be filed on a moment's notice. Note how the SEC's similar motion on March 10 was just a single standard sentence.

Elon's long procedural motion to allow them to reply comes with full citations pointing out how the SEC violated procedure:

Dear Judge Nathan:

We represent Elon Musk in the above-captioned action. Pursuant to Local Rule 3B, I write on behalf of Mr. Musk to respectfully request the Court’s permission to file a sur-reply memorandum of no more than 10 pages by March 22, 2019, in order to respond to new factual assertions and legal arguments raised in the SEC’s Reply Memorandum to Defendant Elon Musk’s Response to Order to Show Cause(the “Reply”). The Reply included, for example, 61 pages in new exhibits and new allegations regarding the Tesla Senior Executives Communications Policy(see Reply at 10 & Ex. 12). CE Int’l Res. Holdings LLC v. S.A. Minerals Ltd. P’ship, 2012 WL 6178236, at *2 (S.D.N.Y. Dec. 10, 2012) (“It is improper in this district and this circuit to introduce new arguments in reply.”); Travelers Indem. Co. v. Excalibur Reinsurance Corp., 2013 WL 4012795, at *2 (D. Conn. Aug. 5, 2013) (“[A]party may not attempt to cure deficiencies in its moving papers by including new evidence in its reply to opposition papers[.]”). Among other things, Mr. Musk would like to address the SEC’s unsupported assertions and submit documentation reflecting the negotiation history between the SEC and Mr. Musk and Tesla, which undermines the newly-presented interpretation the SEC sets forth in its Reply.

Respectfully submitted,

s/John C. Hueston John C. HuestonCc:Counsel of Record​

Note that it was HIGHLY improper for the SEC to do this: introducing new evidence and new legal arguments on a motion they started is close to professional misconduct if I'm interpreting the rules correctly. If the SEC wanted to use these pieces of evidence and these legal arguments they should have done it in their first motion. "Surprising" the other party in a supposedly last filing before a hearing is not only not allowed, it's prejudicial and against procedure and basic trial etiquette.

Also note that the motion was submitted by John C. Hueston, the founding partner of Hueston Hennigan:

John Hueston - Hueston Hennigan Founding Partner

John Hueston has been described by Chambers as “the best lawyer of his generation” with a “commanding reputation for his trial advocacy.” Rated one of the nation’s top trial lawyers, Mr. Hueston has been recognized twice as a “California Lawyer of the Year,” including for his recovery of $5.15 billion after trial.​

Hueston-Hennigan are are putting all their weight behind this - you don't often see a founding partner of a law firm filing a procedural motion ...

The almost immediate filing also suggests to me that they not only expected such a filing from the SEC, but that they actually wanted this outcome and had figured out the best reply in advance.

Basically the SEC already went outside the usual civil procedure of contempt of court motions by requesting a third round - now Tesla is requesting a fourth one. The regular contempt of court proceedings is civil cases is that the 'accusing' party files a motion and the 'defending' party gets a single reply, and a contempt hearing follows. The SEC got one more reply, which is in principle prejudicial to the defending party as it gives the SEC two rounds while they only had one round. So I was expecting this but was unsure whether Elon's team would request a sur-reply motion.

BTW., it's pretty clear from recent price action that some apparently traders knew about this - if SEC officials are leaking to certain market participants about these legal proceedings then that's insider trading, tipping, breaking of attorney client privilege, professional malfeasance worth of jail time and disbarment for life ...

If so then these SEC officials/lawyers are playing a dangerous game here, committing far more serious violations of the law (several felonies) and inflicting far more economical damage than even the worst thing they are accusing Elon of.

As I pointed it out yesterday the pretty much only way forward for the SEC was to escalate, while trying to narrow the scope of the case. So them opposing an evidentiary hearing and ratcheting up the rhetoric was fully expected. They are still trying to pressure Elon into settling. Instead what they are offering is further proof of bad faith and of the harmful effects of their interpretation of the settlement.

My take: it's amateur hour at the SEC and the judge will NOT be amused. But again, I'm not a lawyer and this is just my opinion.

 

[Fact Checking]

Not sure how applicable that phrase is to the SEC's supervisory assistant chief litigation counsel who's bringing the case (Cheryl Crumpton)

There were also these lawyers of counsel to Sheryl L. Crumpton's brief:

• Steven Buchholz
• Walker S. Newell
• Erin E. Schneider

Two of whom appear to be gentlemen, so the phrase is about 50% applicable, at least legally speaking.

 

[Sunlight]

Not sure how applicable that phrase is to the SEC's supervisory assistant chief litigation counsel who's bringing the case (Cheryl Crumpton)

Oh I don't know Karen...

When Desiree Wilson was racing F1 cars in England, I heard her happily say:- " Jeez you have to have huge balls to go flat round that corner"

She'd then add to the bemused audience: - " I've got strap-ons…!"

 

[AndyH]

Delivery estimates have been a little contradictory from Tesla. I was surprised by the low 360-400k in the ER. That sounded too conservative. Maybe they were tossing around numbers trying to decide what would be the best course for 2019, relying on lower sales, higher margins or higher sales, lower margins.

After this second round of SEC-nonsense started then Elon and the team decided "F*** it! We'll go all in on maximum expansion." The following price cuts and store closing was super aggressive. They're scaling SR production as fast as they can. If they weren't explicitly going for 500k before then they're definitely going for it now. It will be hard but not impossible.

95+120+135+150=500

 

[SPadival]

Thanks FC.

To those suggesting that Elon get off twitter. Are you Falcking mad? The man is a walking, talking marketing juggernaut for Tesla. Contrary to the conventional wisdom sprouted by the media, he GAINED a million additional followers in the one year that he was supposedly "unpopular", "erratic", "weird" etc. etc.

As an example, just look at the "controversial" tweet in question - ~ 145k likes. This is priceless stuff that no amount of media buys can hope to surpass.



Those who still don't get it, you guys should read @ZachShahan article again and again until you get it.

 

[anthonyj]

Model 3 prices are still the same

 

[Lessmog]

Geez, can somebody get the SEC a little cheese with their whine?

You just did. They're crackers alright.

 

[Intl Professor]

Normally I am very skeptical of claims the private sector is superior to government workers or institutions. The contretemps of the ongoing SEC challenge to Tesla as narrated above is the clearest example of private attorneys outclassing public servants.

 

[Intl Professor]

You just did. They're crackers alright.

No, to borrow a phrase from the mafia or the president, they are rats.

 

[RobStark]

 

[ReflexFunds]

Delivery estimates have been a little contradictory from Tesla. I was surprised by the low 360-400k in the ER. That sounded too conservative. Maybe they were tossing around numbers trying to decide what would be the best course for 2019, relying on lower sales, higher margins or higher sales, lower margins.

After this second round of SEC-nonsense started then Elon and the team decided "F*** it! We'll go all in on maximum expansion." The following price cuts and store closing was super aggressive. They're scaling SR production as fast as they can. If they weren't explicitly going for 500k before then they're definitely going for it now. It will be hard but not impossible.

95+120+135+150=500

On the call Elon suggested the 360-400k delivery guidance was a conservative number they expected to hit even in a recession. I presume the 350-500k broader range of Model 3 production guidance is valid without a recession, and likely corresponds to 20-40k higher production than delivery given transit times to Europe & Asia. He also mentioned S&X production guidance of 70-100k. So at the lower bound that is 350k 3s produced -40k 3s in transit +70k S/X sold = 380k deliveries and consistent with the conservative guidance in the shareholder letter.

The weakest part of Elon’s response letter to the SEC was that they didn’t explain this.

But I agree, there is a possibility the SECs action provoked Elon to decide to definitely hit the 500k production number and possibly the SR was released a few months earlier than it would have otherwise.

 

[Lessmog]

No, to borrow a phrase from the mafia or the president, they are rats.

Rats nuts whatever

 

[jerry33]

Normally I am very skeptical of claims the private sector is superior to government workers or institutions. The contretemps of the ongoing SEC challenge to Tesla as narrated above is the clearest example of private attorneys outclassing public servants.

Depends on which public servants and which private sector personnel. In general social services are best performed by government workers or institutions, industrial actions are best performed by private sector personnel because the goals are different (helping vs. profit). The litigation sector, which is different than the other two sectors, tends to be about talent, and generally the most talented are the highest paid, government lawyers tend to be underpaid (with some exceptions) and are always overloaded with cases.