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

[mongo]

Short summary: the SEC originally wanted Musk to consent to:

"comply with all mandatory procedures implemented by [Tesla] regarding the oversight and approval of all of his public statements relating to the Company made in any format[.]”.

Musk categorically rejected this. His legal team came back with the suggestion:

“comply with all mandatory procedures implemented by [Tesla] regarding the oversight of his public statements relating to the Company made in any format[.]”

The SEC eventually agreed to:

• The phrasing “written communications that contain, or reasonably could contain, information material to the Company or its shareholders[.]” They
• Added a clause “depending on its significance”
• excised a clause requiring discussion with Tesla’s counsel before publishing communications that “may be reasonably anticipated to invite controversy.”

The SEC now, however, by citing examples of completely innocuous tweets having to do with Tesla (examples here), is effectively trying to enforce a version that was categorically rejected, and not the compromise version.

Unfortunately, the response was 10 pages*, prepare for SEC complaint

Link with exhibits Docket for United States Securities and Exchange Commission v. Musk, 1:18-cv-08865 - CourtListener.com
Although the two likely interesting ones are pay to view...

*(Page 9 was signature, and 10 was the e-filing certification)

 

[sparcs]

Elon's team just filed the sur-reply:

Reply to Response to Motion – #33 in United States Securities and Exchange Commission v. Musk (S.D.N.Y., 1:18-cv-08865) – CourtListener.com​

Did you see any request for an evidentiary hearing? I don't think i saw anything.

 

[ZeApelido]

Fun Google trends data:

Comparing search for "tesla" and "bmw" in the U.S.:

5 years ago Tesla had 1/4 the search volume of BMW (as an example comparison)
4 years ago, it was 1/3
2 years ago, it was 2/5
1 year ago, it was about 1/2
In January, it was about 3/5
After the $35k model release, it spiked to almost 1 to 1! Some of that will dissipate short term, maybe in a year or so search volume will overtake BMW.

In California, it is above BMW. In the Bay Area, search volume is now twice that of BMW.

In Germany it is quite low. About 1/6 of the search volume. But that is up from about 1/10th 2 years ago.

 

[TNEVol]

My understanding:

• The reason the SEC didn't support an evidentiary hearing is because all their theories rely on undisputed evidence.
• I am very certain that Elon's team will ask for an evidentiary hearing, becase it's the only way to get the following pieces of evidence admitted:
  • The expert opinion and expert testimony Elon's first reply relied on in part. The SEC would want it either excluded as inadmissible, or have it at least cross-examined. They might also want to submit their own expert opinion.
  • The lawyers negotiating the settlement could issue affidavits and be subject to cross-examination. This establishes a chain of evidence regarding "intent". Both settlement contract intent and Elon's intent when he was writing the tweets matters.
  • Elon's team might want to call hostile witnesses from the other side, to cross-examine them against email evidence and other testimonies.
  • Various email chains might not be undisputed, because incomplete or lacking other context such as attachments.
  • If Elon's team wants to play hardball they could ask for limited discovery to support their theories. (I don't think they will, the interesting bits will be under attorney client privilege.)
• A contempt hearing typically only takes testimony from the defendant. This is good for the SEC but not enough for Elon's team.

All these pieces of evidence would be appeal-proof if properly handled, and the evidentiary hearing would allow them to be catalogued and recognized by the court, or at least a proper mechanism would be established to get them admitted.

Note that contempt of court hearings have very little procedural framework that I could find - they are free-form to a large degree, with a lot of discretion given to the judge. I have no idea what she wants this to become - and asking the parties gives her a first approximation about how much evidence there is to handle.

My (tentative) guess: there's probably going to be an evidentiary hearing, before a contempt hearing is held. The judge would want all evidentiary disputes resolved by the time she is asking questions from Elon.

I think you are making too much of this. Affidavits are frequently used in lieu of testimony and the SEC does not appear to want to require testimony. I don't see any real advantage to EM seeking an evidentiary hearing if his team thinks his arguments so far would prevail but I don't know their feelings on likelihood ls success.

 

[Cherry Wine]

Did you see any request for an evidentiary hearing? I don't think i saw anything.

The sur-reply appears to be silent on the matter of the evidentiary hearing. Those with more legal experience may be able to help us discern whether the sur-reply's very submission carries with it an implicit request for a hearing. If not, Elon's legal team still have until the 26th to file a request, since the sur-reply does not decline as the SEC's reply did.

 

[humbaba]

*cough* notarecentpicture

Yeah, I forgot to add

 

[Fact Checking]

I think you are making too much of this. Affidavits are frequently used in lieu of testimony and the SEC does not appear to want to require testimony. I don't see any real advantage to EM seeking an evidentiary hearing if his team thinks his arguments so far would prevail but I don't know their feelings on likelihood ls success.

There is going to be an "evidentiary" hearing already: the contempt hearing itself, with Elon present and with the judge asking questions, which generates and confirms evidence.

What Elon's team might want is proper admission of all the other evidence I listed, which the SEC did not accept unopposed and is unlikely to accept without cross-examination.

Why would Elon's team want that evidence? It's key to some of their constitutional defenses, but it might also be useful if they ask the judge for a declaration.

They don't just want the motion dismissed, they want to invalidate the SEC's ridiculous reading of the settlement permanently - not just for this tweet.

 

[Carl Raymond]

I doubt that would be the reason. I think the *false claims by* SEC and the store closings back and forth as well as the *false* questions about demand are to blame for current price.

*clarified that for you*

 

[Lessmog]

Wonderful reply, it seems to my feeble eyes.
One nitpick (page 7 / 11) :

effectively turning it into a sword to be yielded whenever the SEC sees fit​

has incorrect word usage -- a sword is wielded; the opponent had better avoid it.

 

[bdy0627]

"This will not repeat in subsequent quarters."

That one note in his letter has me thinking. Makes this quarter unique for some reason. I bet (just did) he's trying to turn a small profit in Q1 (or not negative despite overseas penalty this quarter). The employees must already be worn out meaning this whole quarter has been a push (obviously). In fear of some employee backlash or it would not have been said at all. Afterall, it was a letter to the employees.

I believe Elon is just referring to the delta in deliveries that this wave represents over previous sales/end of quarter waves. I think the model 3 is creating about a 4 fold increase in vehicle sales with this wave. Even when the Y launches, the increase in sales will be smaller because of the model 3, so the amplitude of the current wave will not repeat in the future.

 

[humbaba]

Wonderful reply, it seems to my feeble eyes.
One nitpick (page 7 / 11) :

effectively turning it into a sword to be yielded whenever the SEC sees fit​

has incorrect word usage -- a sword is wielded; the opponent had better avoid it.

Yeah, and the first note: "A sample review..." -- it actually seems a bit rushed to me, which I was not expecting. Demolishes the SEC claims completely and utterly and makes clear what their true intentions are, but not proofread.

 

[Sean Wagner]

2034: "Look, I know that Tesla makes 98% of the cars on the planets and the word "Tesla" has become synonymous with the word "car", but they still don't have what it takes to succeed against traditional automakers..."

FTFY

 

[MarcusMaximus]

FTFY

Nonono, Mars settlement is for the next year; 2035.

 

[HG Wells]

The sur-reply appears to be silent on the matter of the evidentiary hearing. Those with more legal experience may be able to help us discern whether the sur-reply's very submission carries with it an implicit request for a hearing. If not, Elon's legal team still have until the 26th to file a request, since the sur-reply does not decline as the SEC's reply did.

That was on page 9. Since they had to shorten it to 8 pages they deleted it. /S

 

[Navin]

There is going to be an "evidentiary" hearing already: the contempt hearing itself, with Elon present and with the judge asking questions, which generates and confirms evidence.

What Elon's team might want is proper admission of all the other evidence I listed, which the SEC did not accept unopposed and is unlikely to accept without cross-examination.

Why would Elon's team want that evidence? It's key to some of their constitutional defenses, but it might also be useful if they ask the judge for a declaration.

They don't just want the motion dismissed, they want to invalidate the SEC's ridiculous reading of the settlement permanently - not just for this tweet.

The image of Elon going to a court hearing with press, etc. is not a good look. I can see CNBC broadcasting it live on TV like a murder trial.. sheesh.. need to get this resolved asap

 

[bdy0627]

Main concern until deliveries is macro.

Definitely. It's the only thing making me question adding more LEAPs at these levels right now.

 

[S3XY]

Wonderful reply, it seems to my feeble eyes.
One nitpick (page 7 / 11) :

effectively turning it into a sword to be yielded whenever the SEC sees fit​

has incorrect word usage -- a sword is wielded; the opponent had better avoid it.

I actually read it as wielded. Didn't even notice it said yielded.

 

[KarenRei]

Nafnlaus on Twitter

 

[Pras]

I vaguely remembered so I checked for it. The day after the earning call there was a discussion on the 350-500k model3 volume on Reddit daily investor thread. Can this be shown to the judge that the investors were aware of this guidance?

 

[KarenRei]

Did you see any request for an evidentiary hearing? I don't think i saw anything.

Same thing that caught my eye. So I guess we're still waiting for the 26th. Can't imagine that the judge can just retract the offer of time until the 26th without an official filing from Musk's team waiving it.