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

[Artful Dodger]

Pop Quiz: Indentify which one of these TSLA share price wiggles in the past week coincided with:

1. Elon's Tweet
2. CR's Model 3 downgrade
3. China Tariffs deadline extention
   
4. SEC court filing re contempt

Bonus Question: Find the "Elon Tweet" on this 5-day chart of the QQQ:
(a NASDAQ-100 ETF)

Ooh, to have Elon's 'god-like' power over the entire Market must be an awesome thing. /S

The SEC should be ashamed. More importantly, they should be 'outed'. They are not protecting Investors, they are harming them, while padding the profits of short-sellers (who are NOT Investors).

This is pure abuse of authority by the SEC.

 

[Matias]

That's just the point. It was a stupid meaningless mistake that any human could have made.

That is why he's tweets are supposed to be preapproved.

 

[Fact Checking]

Reconfirming guidance is material.

Sure, in some other fantasy universe. Guidance in our universe is generally valid until the next financial report, or until guidance is unexpectedly changed.

Simply mentioning guidance again is not material information. You should not confuse it with "reaffirming guidance" in financial reports, which start the guidance clock again for the next reporting period.

(Tesla investors in fact apparently knew this better than you: only around 10k shares were traded in that time period. Elon mentioning already guided production was a non-material nothingburger.)

Anyway, how to interpret the facts will be decided by a federal judge, not by the SEC - so Tesla investors are not at the whim of the SEC.

 

[CorneliusXX]

"
Written Communications that contain, or reasonably could contain, information material to

Tesla or its stockholders must,

prior to posting or other publication, be submitted to Tesla’s

General Counsel and Disclosure Counsel (or in the event of the

General Counsel’s unavailability,

Tesla’s Chief Financial Officer and Disclosure Counsel) for preapproval."

So it does not matter, whether communication is true or false. It must be preapproved

It matter whether it is material.

 

[CorneliusXX]

So your view is that negligent or reckless violation of a court order cannot constitute contempt? Wilfulness iis required?

Thar has not hitherto been my understanding of the position of the federal courts, but I would certainly be interested to read any authority or source that you could cite.

From Wikipedia

There are broadly two categories of contempt: being disrespectful to legal authorities in the courtroom, or willfully failing to obey a court order.[3]

The reference:
Legal Dictionary - Law.com

This clearly states wilfullness is a requirement.

 

[CorneliusXX]

Intent does not matter. "must, prior to posting or other publication, be submitted..".

This is in relation to material information only. So the argument will be over the definition of material.

 

[Tslynk67]

JonP on Twitter

Elon just liked this tweet

And then responded:

 

[schonelucht]

Simply mentioning guidance again is not material information. You should not confuse it with "reaffirming guidance" in financial reports, which start the guidance clock again for the next reporting period.

That's how investors think, true. But they do so in the absence of information. So then you assume what was previously true is still true by lack of information. This case should be evaluated however in the context of what 'Elon knows'. And when he repeats guidance, that means he is transmitting information, namely nothing happened in those 20 days that jeopardized our goals for 2019.

 

[Fact Checking]

So your view is that negligent or reckless violation of a court order cannot constitute contempt? Wilfulness iis required?

Your (willful) bias against Tesla is showing.

In my interpretation the court will make a finding of the following facts:

1. Did the tweets contain material information?
   1. If not => case closed in favor of Tesla, and Tesla might ask the court for more oversight of the SEC to not make harmful filings that hurt investors.
   2. If yes, did Elon intend to tweet material information?
      1. If yes => case closed in favor of the SEC, who might ask for further sanctions.
      2. If not, did Elon act willfully recklessly or negligently?
         1. If not => Tesla wins.
         2. If yes, the question is of whether the SEC has the right to restrain Elon's First Amendment protected speech even if he didn't intend to disclose material information:
            1. If yes => SEC wins.
            2. If not => Tesla wins.

As you can see, in this (simplified) decision tree of 5 nodes "intent" matters for 4 outcomes. There's three outcomes in favor of Tesla, and two outcomes in favor of the SEC - with the SEC having a bigger burden of findings of facts going in their favor.

So your point that intent doesn't matter is a gross misrepresentation.

Somewhat ironically, in the only outcome where Elon's intent is not examined, Tesla wins...

The open question to non-troll members of this forum is the probability of the various outcomes - and given the evidence so far IMO the "there was no material information" finding is the most probable one, followed by Tesla asking for potential findings and sanctions against the SEC for their frivolous, harmful filing.

 

[kyzhk]

Insider Trading: A Primer | Katten Muchin Rosenman LLP

“Material information” generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of an issuer’s securities.

All definition of materiality (first 2 pages on google) I was able to find are summarily described in the quote. Interestingly enough I didn't find official memo from sec about the definition of materiality.

Some other definitions I found are always coupling both qualifier: 1)material 2)non-public / insider

I guess the discussion will mainly revolve around definition of "materiality" and if "non-public" is a required quality in accessing whether EM's tweet is in violation.

In physics a lot of the problems can be reasoned by thinking in extreme cases, here I present a not so extreme case example to check if SEC's claim is BS or gold:

Tesla made about 160k model 3 in 2018, it made 0 model 3 back in 2012.

Opps, did I just disclose material information about Tesla? SEC, you gonna sue me or not?

 

[Thekiwi]

Tesla had already set similar guidance on their call -- Elon specifically said "Maybe on the order of 350,000 to 500,000 Model 3s, something like that this year." All the tweet did was restate something the company had already made public. what on earth do you or the SEC see here that is in any way interesting? it's absurd and a total witch hunt.

Saying Tesla will produce around 500k in 2019 is very different to saying Tesla will produce 350-500k in 2019.

 

[AcesDealt]

Elon obviously did not *intend* to post material information. His second tweet represents his likely intention, he had in mind production rate (which is already disclosed) but phrased it poorly in the first tweet and didn't notice his error. If you were to not believe that intention, then one wonders what his intention would actually have been that would cause him to deceive on purpose.

The fact that Elon fell back on the fact that 500k happens to have been referenced in the conference call as the very top of the range strikes me as highly disingenuous.

 

[Toumal]

Anyone notice that we're just splitting hairs at this point?

It is clear that the statement was a forward looking one, and it's in line with what has been stated in the call.

Fred on Electrek said it best: "The stock actually moved more from this news of the SEC seeking to hold Elon in contempt than from the actual tweet that they are apparently worried about moving the stock."

 

[Matias]

I literally linked Tesla's policy (established as per the SEC agreement); did you not read it? It only requires approval for publication of material information. There was no intent to post material information in that post. Furthermore, it actually was within guidance as expressed in the investor call.

You’re repeating “intet” angle. Intent doesn’t matter. Only thing that matters is, whether information was material. That is up to judge to decide.

 

[Fact Checking]

The fact that Elon fell back on the fact that 500k happens to have been referenced in the conference call as the very top of the range strikes me as highly disingenuous.

Not so: Elon is pointing out that the SEC's case is weakened by the ER disclosure, even if we accept the SEC's theory about what happened.

I.e. regardless of whether you believe the set of facts presented by the SEC or Elon, Elon wins the legal argument.

(Of course there's the rather important step of the judge agreeing too.)

 

[Tslynk67]

Let's think rationally here, folks. Dave Buttwinker left less than 24 hours after the tweet. Not a coincidence. He obviously thinks this is going to be a huge losing fight with the SEC, that might even hurt his image. If this was an easy fight, he would've stayed.

SEC does have a case. But I think this is all bologna and will pass with time.

Things to worry about:
Institutional investors may finally say screw this and sell
Fuds for days
Elon tweet meltdown
Ellison becomes CEO (lol)

Here is my prediction. More fud will drive TSLA to the unbreakable $250. Something magical will lift it to $380. Elon announces Go Private 2.0 at $420.69, with proof of secured funding. Everyone and their dog will short it for easy monies, causing a monster short squeeze when they realize he is serious. Then we buy the SEC, take it public and short it. Yeah

If that guy left because of this, then I'd say he's not much of a lawyer, aren't they supposed to be there to defend their clients?

 

[Tslynk67]

über bulls like Karen and fact checking were the same people saying Elon didn't violate the law with the 420 tweet either lol

Indeed, because he didn't.

 

[Tslynk67]

Elon should consider quitting if SEC is going to be such a bitch about everything he writes.

That's exactly what the shorts want to achieve from all of this...

For sure the SP would plunge, but I believe Tesla would easily survive and then thrive anyway, there are many smart people in that company that share the same vision as Elon.

 

[Thekiwi]

Not so: Elon is pointing out that the SECs case is weakened by the transcript, even if we accept the SEC's theory about what Elon intended.

I.e. regardless of whether you believe the set of facts presented by the SEC or Elon, Elon wins the legal argument.

(Of course there's the rather important step of the judge agreeing too.)

You don’t think stating only the highest figure of a previous given wide range is somewhat different to giving the entire range?

I for one would value a company quite differently if it said it would make “around 500 widgets this year”, versus if it said “we will make somewhere between 350 to 500 widgets this year”

 

[WarpedOne]

Its not the smarts, its not the vision. It is the drive.

Elon has it ... don't know 'bout others, maybe JB to some degree but not many more.
How many VP/managers quit Tesla to pursue greener pastimes, easier job, less stress?

One is not successful because of the smarts or the vision.
Success comes from the drive to do anything and everything necessary to succeed.