Artful Dodger
"Neko no me"
He was parked at a Supercharger and got ICE'd.
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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
- Start date
He was parked at a Supercharger and got ICE'd.
A group of Maxwell investors filed suit to halt the acquisition due to unfair pricing. We knew this was going to happen. Tesla being interested in their tech brings credibility therefore intrinsic value. Bet you these stock holders are thinking Maxwell is the next trillion dollar company.
Tesla's Maxwell Acquisition Blocked, Investors Sue To Halt 'Unfair' Process
Tesla's Maxwell Acquisition Blocked, Investors Sue To Halt 'Unfair' Process
Seems ridiculous, they were struggling to find capital to fund their research and future plans. This was the route promised to investors which would show them a return without adding dilution. I assume these lawsuits are standard fare in every acquisition with attorneys attempting for a cash grab. Not my area of expertise.
Antares Nebula
Active Member
It seems that the contempt case is going to largely revolve around whether the original tweet about 500k production is considered material.
I (and others here) have argued that it is not (see prior posts by myself and @Fact Checking and others). To wit, the 500k *produced*, which was mentioned in the first tweet, is well within an approx 400 to 600k *deliveries*, as already stated or directly implied by the Q4 Investor Letter and CC (and thus already public knowledge and non-material). I argued that this is similar to saying that Tesla made a profit in Q3 and Q4 or that Tesla makes only electric vehicles and not ICE vehicles. This is all public knowledge (and so non-material) and does not need pre-approval.
But some people (elsewhere) have argued that ANY forward looking statement about Tesla's production, delivery, revenue, or other similar numbers is material, even if those numbers have been previously stated. It's kinda like when a company re-iterates prior guidance at a later date. This is where it gets murky and where true legal expertise (which I don't have) is required.
On the one hand, what if Musk simply tweets per verbatim portions of prior quarterly letters, 10ks, or transcribed CC calls (either in response to a question or unprompted). Would this be considered material information? I would think not. Then is there a difference between that kind of information and tweeting *non-verbatim* but still information consistent with or directly implied by the aforementioned documents (like the 500k produced) that makes the latter material info?
Also what if Musk tweeted that Tesla will continue to make the model S this year. This is a forward looking statement, which at the same time seems rather obvious. Or what about a tweet that Tesla will continue to make electric vehicles?
The upshot I think here is that, like any (legal) definition, there is a gray area of what is considered material or not material. And this also mixes in with what is considered public knowledge, and what can be inferred from common sense based on such knowledge, all the while rubbing against one's first amendment rights.
And lastly, one must consider if a procedure is too onerous. Bears and critics will claim that Musk made a forward looking material statement, regardless of whether it was in agreement with prior information. Bulls and supporters will claim that such strict adherence to the *letter of the law* is too onerous. Musk simply made a common sense inference based on prior public knowledge. Requiring him to vet every such statement would be too onerous and would not be in the *spirit of the law*. Let us hope the judge chooses the latter.
I (and others here) have argued that it is not (see prior posts by myself and @Fact Checking and others). To wit, the 500k *produced*, which was mentioned in the first tweet, is well within an approx 400 to 600k *deliveries*, as already stated or directly implied by the Q4 Investor Letter and CC (and thus already public knowledge and non-material). I argued that this is similar to saying that Tesla made a profit in Q3 and Q4 or that Tesla makes only electric vehicles and not ICE vehicles. This is all public knowledge (and so non-material) and does not need pre-approval.
But some people (elsewhere) have argued that ANY forward looking statement about Tesla's production, delivery, revenue, or other similar numbers is material, even if those numbers have been previously stated. It's kinda like when a company re-iterates prior guidance at a later date. This is where it gets murky and where true legal expertise (which I don't have) is required.
On the one hand, what if Musk simply tweets per verbatim portions of prior quarterly letters, 10ks, or transcribed CC calls (either in response to a question or unprompted). Would this be considered material information? I would think not. Then is there a difference between that kind of information and tweeting *non-verbatim* but still information consistent with or directly implied by the aforementioned documents (like the 500k produced) that makes the latter material info?
Also what if Musk tweeted that Tesla will continue to make the model S this year. This is a forward looking statement, which at the same time seems rather obvious. Or what about a tweet that Tesla will continue to make electric vehicles?
The upshot I think here is that, like any (legal) definition, there is a gray area of what is considered material or not material. And this also mixes in with what is considered public knowledge, and what can be inferred from common sense based on such knowledge, all the while rubbing against one's first amendment rights.
And lastly, one must consider if a procedure is too onerous. Bears and critics will claim that Musk made a forward looking material statement, regardless of whether it was in agreement with prior information. Bulls and supporters will claim that such strict adherence to the *letter of the law* is too onerous. Musk simply made a common sense inference based on prior public knowledge. Requiring him to vet every such statement would be too onerous and would not be in the *spirit of the law*. Let us hope the judge chooses the latter.
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I don't necessarily agree with it, but no one here should be throwing stones after the going private bitching here.
Fact Checking
Well-Known Member
So I think (as a non-lawyer) I'm not sure this extends to constitutional First Amendment prohibitions: the U.S. Government cannot require, even via voluntarily agreed to contracts and settlements, terms that violate the Constitution.
One prime example are the very restrictive Trump NDAs of White House staffers, which are considered unenforceable by many:
Trump NDAs can’t silence ex-White House officials: legal experts | Reuters
“These NDAs strike me as clearly unconstitutional under the First Amendment,” said Kitrosser.
“A public employee,” added Fenster, “can’t be forced to sign away the right to speak.”
“These NDAs strike me as clearly unconstitutional under the First Amendment,” said Kitrosser.
“A public employee,” added Fenster, “can’t be forced to sign away the right to speak.”
With the obvious national security and privacy exceptions.
While a consent decree is a stronger legal document than an employment contract, and even for the WH employment contracts the legal profession is ... conflicted.
But note what the SEC is trying to do here: they are trying to restrain all of Elon's Tesla related speech, just on the basis that it 'might' contain material non-public information, and the legal challenge they started here uses a case where arguably Elon didn't disclose any material non-public information.
Note how the SEC lost a key First Amendment case in the past:
Securities and Exchange Commission
"In Lowe v. Securities and Exchange Commission (1985), the Supreme Court addressed whether the SEC violated the First Amendment when it sought to prohibit Christopher L. Lowe from distributing his “impersonal” investment advice letters. The SEC sought to regulate Lowe’s newsletters under the Investment Advice Act of 1940. The Court decided the case primarily on statutory, rather than constitutional, grounds in determining that Lowe had the right to publish his letters under a statutory exception for newspapers."
"In Lowe v. Securities and Exchange Commission (1985), the Supreme Court addressed whether the SEC violated the First Amendment when it sought to prohibit Christopher L. Lowe from distributing his “impersonal” investment advice letters. The SEC sought to regulate Lowe’s newsletters under the Investment Advice Act of 1940. The Court decided the case primarily on statutory, rather than constitutional, grounds in determining that Lowe had the right to publish his letters under a statutory exception for newspapers."
Note that Lowe was a convicted felon, yet he won the case. But the facts of the case are different: he was convicted and ordered, he didn't settle.
Fact Checking
Well-Known Member
They are wrong, "material information" or "material non-public information" is non-public by its nature. You can see the SEC itself use 'material information' as a shorter form of 'material nonpublic information', in their own filings, on their own webpage:
Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: Netflix, Inc., and Reed Hastings
"material, nonpublic information"
"disclosures of material information"
"material, nonpublic information"
"disclosures of material information"
This is really an uncontroversial point I believe, but the shortz are trying to use this to sow confusion, and maybe the SEC is trying to use that confusion as one of their lines of attack.
I believe the SEC's main (undeclared) tactical approach here is that the tweet was non-pubic information "accidentally", because it was mistaken and outside guidance. They didn't even cite the conference call transcript, which suggests to me that they missed the 350k-500k guidance. They do cite the 10K and update letters with the narrower guidance.
They don't call it an accidental material non-public information for strategic reasons I believe, they want to accuse Elon (silently) of intentionally writing a misleading tweet, and are giving the judge a tool to not have to prove that via the 'non-willful' case law citation.
I believe most of that approach is nullified by the plain fact that the 500k figure is within previous guidance, even if it was imprecise.
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Krugerrand
Meow
And that attitude is another reason you don’t work there, never mind you tweeted numbers several weeks in a row.
Yes, I think mergers seems to spawn a lot of litigation.
In the old days when the FCC had a little more control over broadcast properties, I think I remember the FCC exerting it's control over broadcast properties that were being naughty by denying them ability to purchase (or merge with) other properties until they fixed whatever infraction was bothering the FCC (I hope I have this mostly correct - been a while, might have been the phone companies). I am thinking about this since it _might_ be in the realm of sanctions for the SEC to do something similar with Tesla. I am out of my depth re the SEC's enforcement powers so this disturbing thought may be misplaced.
dc_h
Active Member
He always means run rate.
First, Karen, thanks for raising awareness of the AMA, and the issues you brought up in your questions.
I want to point out a piece of Tesla/CR history that some here are probably not aware of and I think sets a precedent for CR making a change to their rating system that would mean restoring their "recommended" status for the Model 3 (and potentially upgrading their S and X ratings).
Tesla's vehicles have broken Consumer's Reports ICE age rating system, AND, CR knows this... in fact, CR already in the past choose to revise their rating system due to the Model S (P85D) scoring 103 out of 100 in 2015 (a revision that brought ratings of Tesla cars back towards the ICE car pack).
Tesla P85D Breaks Consumer Reports Rating Scale
A well done EV simply did and does things beyond what CR thought cars were capable of when they created their rating system (CR explicitly said the ratings by definition had a 100 top score, yet the Model S got that 103). The P85D they tested in 2015 did 0-60 in 3+ seconds, and got about 90 MPGe (all in a package that was the safest car ever tested by NHTSA, the US government agency that rates vehicle safety). Before Tesla, a car faster than a BMW M5 with double the fuel economy of a Prius was a fantasy.
As you can see in the Teslarati article, CR did not simply leave things in place where Tesla's would blow out ICE cars in their ratings. Instead they revised the rating system.
CR didn't give a detailed explanation of these revises, but, it's quite clear the revisions understate areas where Teslas strongly best ICE cars. That is, given that Teslas score a 5/5 on fuel economy, do any of those ICE cars really deserve more than a 1/5? i.e., how does the BMW 3 series score a 4/5 on fuel economy when CR tested its mpg at 26 overall, while the Model 3 had a 130 mpge. Similar points could be made about Tesla's "transmission" (100% smooth) and acceleration (instant) as compared to ICE cars. To be fair, CR, could add a "range" category, to fairly reflect the one area EVs underperform ICE cars. That said, I think adding new OTA capability and Driver Assist capability ratings would be at least as important to add to their system as such a range rating.
The point is, Tesla's are outside of what CR's system can make sense of. There is then the obvious logical flaw of the Model 3's recommendation being dropped due to a reader survey's "reliability" findings... the very same group of readers who said "yes" at a higher percentage than any other car with data on CR's "Would you buy this car again?" owner satisfaction question. I know that Jake cited the Corvette and Jeep Wrangler (IIRC) as having had similar results, but, 1) doesn't that just meCR's ratings system does not capture some of Tesla's advantages (AP is genuinely what blows me a way the most about my car... no AP for Corvette or Wrangler), 2) as has already been pointed out, lumping together issues that make the car undriveable together with paint, etc., issues, does not make sense, 3) not only are they dropping the car their readers rated "most satisfying," they are dropping the car with the best safety rating on the planet (this does not apply to the Wrangler and Corvette), 4) perhaps it doesn't make sense to have "reliability" trump "overall satisfaction" on those other two cars either.
The reason I put that paragraph above in bold large font, is that I think the fact that CR has already revised their rating system because Tesla's break the mold (and, that instance of a revise was favorable to all the ICE cars and unfavorable for Tesla) would be very helpful to bring into any further conversation with CR asking them to reconsider their recent removal of the Model 3 from their recommended list. That is, what better context for CR to revise their ratings because of Teslas breaking the mold of their rating system, than the fact that CR already did this in the past.
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Krugerrand
Meow
Didn’t she tweet something about having a lawyer? Maybe it was Tesla’s response?
Antares Nebula
Active Member
@Fact Checking I really hope your right. I hope the judge throws the book at the SEC. What gives me pause is why the Tesla lawyers didn't make this case with the SEC, and if they did, why then is the SEC still pursuing. Are either the Tesla or SEC lawyers truly that incompetent or are we missing something here?
sundaymorning
Active Member
No longer worth the time for NHTSA to investigate Tesla crashes as there are 180,000 vehicle fires per year due to crashes.
National safety board won't investigate fiery Tesla crash that killed doctor
National safety board won't investigate fiery Tesla crash that killed doctor
I forget his name - someone quite successful in his career said the best advice he got in his life was "If you expect something to happen, double the expected time". I observed the same phenomenon too. If Tesla push really hard, 1 million cars could be achieved in 2021. It's more realistic to set the target at 2023.
Talking about useful lesson/advice, Hong Kong billionaire Li Ka-shing said one of the most important lessons he learned is that having cash flow is really important. Sometimes there maybe recessions, if you have continued cash flow, instead of being forced to sell things, you could use the cash to buy more attractive assets.
The other major issue CR misses is that Teslas continually improve after purchase through OTA updates. Every single car that does not do this should have a huge negative mark against it in their ratings.
Yup, was a long post, but, I mentioned Tesla's strengths with OTA, and driver assist (AP) not being reflected in CR's ratings. The thing that most blows me away about driving a Model 3 is AP. Part of why I said that if CR really adapts to how Tesla has broken the mold the ratings of the S and the X would go up too. It's absurd to me that the X scores 13th place out of 16 large SUVs in their current ratings. The current scoring system just does not fully reflect an EVs advantages.
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One prime example are the very restrictive Trump NDAs of White House staffers, which are considered unenforceable by many:
Trump NDAs can’t silence ex-White House officials: legal experts | Reuters
“These NDAs strike me as clearly unconstitutional under the First Amendment,” said Kitrosser.
“A public employee,” added Fenster, “can’t be forced to sign away the right to speak.”
With the obvious national security and privacy exceptions.
While a consent decree is a stronger legal document than an employment contract, and even for the WH employment contracts the legal profession is ... conflicted.
But note what the SEC is trying to do here: they are trying to restrain all of Elon's Tesla related speech, just on the basis that it 'might' contain material non-public information, and the legal challenge they started here uses a case where arguably Elon didn't disclose any material non-public information.
Note how the SEC lost a key First Amendment case in the past:
Securities and Exchange Commission
"In Lowe v. Securities and Exchange Commission (1985), the Supreme Court addressed whether the SEC violated the First Amendment when it sought to prohibit Christopher L. Lowe from distributing his “impersonal” investment advice letters. The SEC sought to regulate Lowe’s newsletters under the Investment Advice Act of 1940. The Court decided the case primarily on statutory, rather than constitutional, grounds in determining that Lowe had the right to publish his letters under a statutory exception for newspapers."
Note that Lowe was a convicted felon, yet he won the case. But the facts of the case are different: he was convicted and ordered, he didn't settle.
I would add a few criticisms of the SEC's brief to the list.
- A central issue is whether Elon's tweet was material. But, remarkably, the SEC does not discuss the legal standard for materiality. No case law cited. Nothing. Bizarre.
- An important aspect of the materiality issue here is whether a statement that had no discernable (and certainly no significant) impact on share price can nonetheless be material. I am no expert, but this appears to be a complex and conflicted area of law -- see quoted discussion at the bottom of this post. Again, very odd not to even discuss the law on what appears to be a central issue.
- In addition to not discussing the legal standard, the SEC brief does not acknowledge, much less discuss, the fact that Elon's tweet had no impact on share price. That is a glaring omission and an issue Musk's legal team will likely hit hard.
- The SEC also hand waves over materiality in their discussion. For example, they make the following statement:
"Finally, it is clear that the information in Musk’s 7:15 tweet—a statement of the number of cars Tesla would make in 2019—was at least reasonably likely to be material to Tesla and its shareholders and therefore required to be pre-approved. Tesla’s Policy lists 'projections, forecasts, or estimates regarding Tesla’s business' as an example of a subject that may be material to Tesla and its shareholders. Id." - That argument is very misleading, as it fails to acknowledge that under Tesla's policy whether information regarding forecasts or projections is material depends on its significance (duh): "Information on the following subjects may, depending on its significance, be material to Tesla or its stockholders . . . projections, forecasts, or estimates regarding Tesla's business." Dropbox - 1-18-cv-08865-AJN - Simplify your life
That doesn't mean the SEC will necessarily lose, but their brief looks like a slapdash effort and full of obvious holes. Sloppy.
The summary below suggests the cases are conflicted on whether a statement has no impact on share price by definition means it is not material. Either way, the lack of any impact on share price seems likely to be a fact the court takes into account.
"In order to prove securities fraud under federal law, one must show that the defendant either misrepresented a material fact or omitted to state a material fact when under a duty to speak. The fact must somehow matter to investors. But the courts have struggled mightily to determine when a fact is material.
On the one hand, the Supreme Court has held that a fact is material if it would be important to a reasonable investor in deciding how to act—how to vote or whether to trade. The information need not be so important that it would change the outcome. But it cannot be so trivial that it would not affect the total mix of available information. Moreover, it must matter in the sense that an investor can do something with the information. For example, although the fact that a merger lacks a business purpose or that the board of directors thinks the price is low might be important in some sense, these facts may not be material if the investor has no vote on the matter or the controlling stockholder has enough votes to assure approval.
On the other hand, the Supreme Court has also equated materiality with price impact in endorsing the fraud-on-the-market (FOTM) theory that a reasonable investor presumably relies on the integrity of the market and that a material misrepresentation presumably affects stock price. Arguably, this definition of materiality (if it is a definition) is at odds with the other definition. It is quite clear under the first definition that a fact can be material and yet not be so important that it affects the actions of a reasonable investor. But under the second definition it is equally clear that to be material a fact must affect the actions of at least some investors—otherwise there would be no price impact. In other words, some number of investors who would not otherwise have traded must have been motivated to buy or sell or else stock price would not likely have changed any more than can be explained by the normal Brownian motion of the market.
So which is it? Must a fact have price impact to be material? Or is it enough that the fact is important to investors even though it does not affect market price?"
The Two Faces of Materiality
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Antares Nebula
Active Member
I actually think that image looks kinda cool and artistic.Was just about to post that, quite strange
Fact Checking
Well-Known Member
I believe you are missing that this is regular procedure: Tesla only saw the full memorandum and detailed arguments of the SEC when the SEC made their filing.
Before that the SEC only wrote short, curt letters, to which Tesla replied in a narrow fashion as well.
I'd expect Tesla to bring out the big guns in their reply filing. My post tries to guess how Tesla's reply filing will look like on March 11.
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