TSLA Market Action: 2018 Investor Roundtable

[hobbes]

Probably already posted, but don't have time to wade through 20 pages at this moment:

SEC Sues Elon Musk for Fraud, Seeks Removal From Tesla

What I find interesting here is that SEC offered a settlement, which Elon refused, hence the action.

So either a) the settlement was unacceptable or b) Elon is innocent of the charge - I believe the latter, but we still need to be dragged though this.

Very clever by the shorts to manipulate the SEC to do this at this moment, they were about to get burned badly - could still happen.

My take/guess: They went through the negotiations, got an ok-ish deal but in the process they realized that the SEC really doesn´t have a solid case at all. I hope Elon made the decision to decline it in agreement with his legal council.

 

[dondy]

I really hate that quote now because Elizabeth Holmes of Theranos used it - and she is a legitimate fraud.

Let’s not create any bridges between Holmes and Musk please.

"Imagining clandestine Tesla mechanics stripping Nissan leafs and puting on them Tesla covers and badges".

But seriously what is the point of comparing Holmes with Musk?
First was "lady" of the Wall Street and enjoyed from the start huge support of the Wall Street elite. One should not look father than the board of directors:

former Secretary of Defense Bill Perry, former Secretary of State and National Security Adviser Henry Kissinger, former U.S. Senators Sam Nunn and Bill Frist (a heart-transplant surgeon), retired U.S. Navy Adm. Gary Roughead, retired U.S. Marine Corp Gen. James Mattis, former Wells Fargo CEO and chairman Dick Kovacevich, and former Bechtel Group CEO Riley Bechtel.

Musk on the other hand is pretty much on his own, and even his other company Spacex won serious support in NASA and AirForce only during last years. Indeed this support is becoming unconditional, lol, but it's apparently just Musk's feature.

Theranos was selling semi-faked blood analyses actually processed on standard equipment installed and used with big secrecy. The breakthroughs they promised never realized and they never showed anything real.
Musk's Tesla is producing real cars we all enjoy. With Model 3 Tesla entered leaders market. Tesla has real IP. BMSs designed by Straubel are marvels checked and (old models) reversed engineered by many engineers. Tesla battery packs when sold on the secondary market go much faster and are significantly more expensive than alternatives. Cars are safe, battery systems do work. Everything is real.

For how long it's ok to repeat ad nauseum this nonsense generated by shorts "shiit factory"?

 

[Scuttlebutt]

Well said.

Item 1. Trump is a crony capitalist. Item 2. One of his favorites is coal, the investors and owners, not the actual miners. Item 3. Trump is part of the tribe who hate green energy and he has proved his worth by rescinding U.S. participation in the Paris Climate accord. Item 4. He has not hesitated to attack many corporations, especially the media and the Washington Post in particular because it is owned by Jeff Bezos, so he has attacked Amazon. Item 5 and most important, the White House has issued a ukase for all agencies to look for ways to impede the march toward green energy.

QED, the suit by SEC is their response to the ukaze. Like good burrocrats they are just following the Leader. There appears to be collusion, and of course I know there is no criminal statute against collusion, but it may be a Rico violation by the government itself.

Is that an impeachable offense, a high crime or misdemeanor? The treason part best left to the Mueller investigation which will likely disappear soon.

Just trying to put all this jabber into context.

6)Elon bailed on Trump business roundtable. A slight Trump would remember. 7)Petrodollars are involved in the Mueller investigation.
8) Greenie's love Elon and Trump's a bully.

 

[Fact Checking]

You insinuate they have been rushing, but you can't know.

I'm not saying it, former SEC lawyers cited by the Wall Street Journal are saying that it was rushed:

SEC Action Could Mean Ban for Musk, but It’s Not Certain

"Former SEC lawyers said the speed of the investigation was unusually fast, as the SEC complaint came less than two months after Mr. Musk’s tweet."
​

The timing of the SEC lawsuit is also speaking volumes, and that the SEC outlined at best outdated arguments as "facts":

"15. In 2018, stock analysts and investors increasingly began to question whether Tesla could meet its previously announced production targets and begin to earn sufficient cash in order to sustain its operations and pay its existing debt load. By August 2018, more than $13 billion worth of Tesla shares were being “shorted,” meaning they were sold by investors who did not own them at the time of the sale."​

I'm sure it's entirely accidental that the SEC performed this investigation and filed a lawsuit "unusually fast", just two trading days before a central claim of their (frankly, ridiculous) damages legal theory of "investors" who earn money when Tesla shareholders are harmed is falsified...

 

[ValueAnalyst]

only -9.5% premarket now. lets see where this goes. either games being played by shorts to prevent the uptick rule or realisation that it is oversold and traders are stepping in.

Likely gaming around the uptick rule

 

[Fact Checking]

6)Elon bailed on Trump business roundtable. A slight Trump would remember.

He did it "under pressure" after others bailed and the 'round-table' was already largely dysfunctional - shortly afterwards it was also "disbanded" by Trump. Elon should probably have held out for a few more days, but I don't think he was a major mover there.

 

[Fact Checking]

Likely gaming around the uptick rule

I'm not sure about that - I believe it's genuine lack of selling pressure and dip-buying. Here's a re-post of my earlier description of today's NASDAQ pre-market price action of $TSLA:

either games being played by shorts to prevent the uptick rule

They cannot really avoid it: ~$276 is the threshold and it's triggered if TSLA opens below that or anytime during the day. They could keep the price above $276 throughout the day, but they'd risk two things:

• They'd offer liquidity to any investors who got cold feet due to the SEC lawsuit that could take years to resolve
• They'd also set themselves up for Tesla potentially rushing the Q3 delivery report and release it on Monday, before trading opens. That would catch the shorts with pants down.

So I think today shorts will either hold or maybe even cover at these advantageous price levels, and price action would be defined by genuine, real investors selling or buying TSLA.

or realisation that it is oversold and traders are stepping in.

That seems the more likely explanation to me so far, from seeing the early trading price action:

• pre-trading price isn't really conflicted but moving up in bursts,
• volume is higher than average but still much lower than regular trading volume,
• i.e. there's no signs of sell pressure caused by investor panic - but there are signs of opportunistic buying.

I suspect the WSJ article characterizing the possibility that Elon would be barred as a CEO as remote also helped.

 

[KarenRei]

What the heck? I went to bed with dreams of buying in the $250s today and I wake up and the pre-market is $275? Come on, people! Clearly Tesla is DOOOOOOOMED! Sell sell sell!!! Short short short!!!

Ugh.... I never get to spend this powder....

 

[theschnell]

I’m worried the “Fraud” headlines may pull in some retail shorts today, but hopefully the 10% shorting rule will keep that to a minimum and then by early next week we get sales numbers which should be quite good and then within 5 weeks we get financials which should also be quite good.

Fundamentally the company has never been on more solid footing. Again, they built 100,000 cars total last year, and will build 75,000+ this quarter and likely close to 90,000 next quarter, all being sold at an ASP of $60k or more.

So we just have to hold through this mess and there will be greener pastures on the other side.

 

[Fact Checking]

I’m worried the “Fraud” headlines may pull in some retail shorts today,

Not just shorts, but there will be also stop orders of longs triggering, due to the opening tick gapping down ~10%, plus any investors who turn bearish on the news.

But for shorts it's particularly dangerous to enter today: the uptick rule might be easily triggered, which would make it hard for them to keep the short momentum going, and dip-buying and pre-Q3-delivery-report buying could trap them into a short position at unfavorable prices, and could also expose them to a significant up-move on the Q3 delivery report.

It's also dangerous for shorts to enter now in the pre-market: the uptick rule could be triggered on the open straight away, again trapping them for two days under the uptick rule that bans shorts from making pressure-sales that mark down the price artificially.

 

[dondy]

Again, the structure of a private Tesla isn't clear. The article doesn't mention a share price or a timeframe. Before that presentation Musk doesn't even seem to have thought about Volkswagen. How could he have secured that investment with an formerly unknown party? And should there actually have been binding agreements (as opposed to preliminary agreements, letters of intend, verbal stuff) you can be pretty sure the SEC saw them before they sued.

Preliminary agreements, letters of intend are sufficient everywhere Germany included. Verbal stuff is sufficient (in this case) in California. "Funding secured" means Musk had collected sufficient funds to do privatization.
"Volkswagen" was obviously an external factor never seriously considered by Musk, so why to bring it here?

Obviously the SEC doesn't share your view about how secure funding was, AFTER TAKING A LOOK AT TESLA INTERNALS.

Sure and I can predict future by looking at the skies.

"Looking at Tesla Internals" would provide SEC with exactly nothing. Musk was a buyer. Tesla a seller. Buyer makes an open bid, that's how things should be done in public market, and it's exactly the way Musk did it. Without those stupid "leaks" with accompanied inside trading everybody else is using.

Right. He bought several weeks before that tweet and announced a short squeeze. Maybe he didn't realize direct monetary gains, but was able to avoid losses? Maybe it's just legal boilerplate, that has to be in there, just in case there have been gains? Again, you probably don't know anything about this, while the SEC does. But still you are trying to construct a contradiction from it.

Everything SEC knows they presented in complain, that's how american justice works. It's public. If something isn't they make it closed and explain their reasons.

Is a certain action more legal or less illegal because the stock price moves only 6% instead of 20%? Can you please show me the law that's saying "Oh well, as long as the stock only moved by [epsilon] it's fine"?

Legality is determined by the discovery of intent.

Cool. Some more opinion you disguised as a fact. Who are you to define what an investor is and if shorts are protected by security laws? You also omitted the losses Tesla longs may have had to take, when they bought more at $350+ assuming that funding was secured and nothing but a shareholder vote was needed to finalize the deal. Last but not least the SEC of course shouldn't enforce the interest of Tesla shareholders. They should enforce the law. Again you pretend to know more than the guys doing this for a living.

Those "longs" are stupid. Deals in public companies have to be public and declared in 8-k form, initial directors meetings included. There was nothing of a kind.

You insinuate they have been rushing, but you can't know. You assume the Q3 report is negative for shorts, but you don't know. You are implying between the lines, that the SEC has some other, dark and ominous motives, to do what they did and base this on your unbacked assumptions. Facts? Not so much.

There is no need to imply anything. There are plenty of fictitious reports and insinuations published by major MM which caused more significant deviation of TSLA than his tweets. There was no SEC actions ever.

I believe it's hilarious, that you dare to call yourself 'Fact Checking' and write stuff like this. Right now you seem to be in 100% full denial and conspiracy mode, which is dangerous.
End.

His last paragraph is pretty much a mirror of the nonsense shorts write. I think you are taking yourself too seriously. chill out.
P.S. btw. how is going with cell production in Europe???

 

[CuriousSunbird]

What were the terms offered by SEC here.
r

I have been a subscriber to the SEC enforcement updates for almost two years now (because of interest in a different stock potentially subject to proceedings). One can subscribe easily through their website. From that, it appears to me that in a large number (probably the majority) of cases where the rule breaker (i) did not seek direct personal gain, and (iii) settled, the SEC agreed a 5 year D&O ban plus a monetary penalty. I suspect that is what was offered here.

 

[schonelucht]

That's all Elon has to say to the judge or the jury:

"I was under the firm conviction that the Saudi interest was genuine and strong, supported by their words to me on July 31 and their actions of buying a 5% stake on the open market, and I was also convinced that I could also get other sources of funding if required.

The only thing that I was uncertain about was shareholder support: what would institutional and retail investors think about the deal, would they vote in favor of it? And that is why I informed them about the going-private efforts."​

If that's what was Elon's state of mind then that's incontrovertibly supported by all available evidence and is entirely consistent with all his communications, both public and now published by the SEC.

I don't think that's sufficient. The lawsuit alleges that he "knew or was reckless in not knowing....". It seems that the standard the SEC wants to apply is not merely what the state of Elon's mind was at the time, but also what it should have been for a CEO acting not recklessly towards the shareholders in his company. As you said, the Dell deal took over 6 months to organize. So there is a case to be made that an informed CEO should know that these take-private deals are not decided in a meeting of 30-45 minutes where nothing of substance is discussed.

 

[bhtooefr]

I'm telling you how he can testify and say that's how he thought. He knew the board will do what he wants, and we all know he didn't think this through very well. So was this reckless? Yes. Did it have any intent to defraud? Not really.

Also, let's be careful with the word "reckless" - it means something here.

Negligent, I could easily believe, though. (Negligent isn't a crime in this case.)

 

[MXWing]

Closed: Sep. 28, 4:55 a.m. EDT
Pre-market 276.50 −31.02 (10.09%)​

Notice the % drop vs Thursday's close? They'll stay just over the -10% trigger for the Short selling rule. They don't want to repeat their mistake from 2 weeks ago when they were restricted from shorting for 2 days.

(Bitches)

So I gather if we are close to 10% wouldn’t it make sense for a Tesla long to just push it past the threshold and immediately rebuy the shares? Short halting would be absolutely amazing.

 

[CuriousSunbird]

Great info. Thank you. What would be the basis for a criminal complaint against Elon from the DOJ? That would involve a much higher level of proof no doubt. There does not appear to have been any financial benefit to Elon from this. What angle would they be taking?

One angle to take would be that he dishonestly deprived put option holders of a portion of the value of their property.

However, I suspect that would be harder as those kind of charges generally require intent, whereas in the SEC complaint the requisite standard is only recklessness.

 

[Fact Checking]

The lawsuit alleges that he "knew or was reckless in not knowing....". It seems that the standard the SEC wants to apply is not merely what the state of Elon's mind was at the time, but also what it should have been for a CEO acting not recklessly towards the shareholders in his company.

I think that legal argument is tenuous, but even under that standard it could have been considered equally reckless to allow rampant trading on the Saudi news, locking out most investors of that information, while Elon was in full knowledge of the true intent of the Saudis: they already bought a significant stake in Tesla, they supported taking Tesla private, and wanted a Gigafactory built in Saudi Arabia.

So without betraying confidential information he wrote that he was considering taking Tesla private, with funding secured.

The lawyers are going to hash it out what level of agreement counts as 'secured' under those circumstances, but generally even verbal agreements count as such in California. If the agreement by the leader of the Saudi investment fund, who manages 250 billion dollars in assets which they want to grow by 100 billion dollars per year, who just told you that they bought 5% of Tesla, and supported the notion of taking Tesla private (with conditions) isn't funding secured, then I don't know what is.

There's no requirement for there to be anything in writing, for the funds to be set aside in cash in bank accounts, etc. - that kind of shifting of the argument is a legal fantasy of the shorts. The SEC's complaint doesn't cite any statutory obligations for Elon to have secured funding in writing - they go on the tenuous legal theory that not having discussed certain details implies that funding wasn't secured. Those arguments look unconvincing to me. The burden of proof is on the SEC to demonstrate that Elon had such an obligation.

Further if what Elon wrote was true, which I think it was, then the SEC is going to have a hard time arguing that disclosing true facts to shareholders is 'reckless'.

In fact I believe it would have been reckless for Elon to not announce the going-private effort - and if he didn't and the news leaked he might be facing shareholder lawsuits for them not having that information while well-informed traders had it for weeks/months ...

 

[avoigt]

FYI

Tesla’s Board of Directors has issued a statement expressing its full support for Elon Musk. The board’s statement, while brief, emphasized that apart from standing behind the beleaguered CEO, Tesla is focused on its fundamentals, particularly the ongoing Model 3 production ramp. Following is the Telsa Board of Directors’ statement about the SEC filing.

“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful U.S. auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders, and employees.”

Elon Musk stands his ground against SEC as Tesla heads towards historic Q3

 

[Tslynk67]

My take/guess: They went through the negotiations, got an ok-ish deal but in the process they realized that the SEC really doesn´t have a solid case at all. I hope Elon made the decision to decline it in agreement with his legal council.

Yes, this is my reading of the situation. Musk acted in good faith, even though his choice of words was not maybe the best. Musk's lawyers believe he has a solid case should it come to court.

Can also be they received some new material information, like an emails from a Saudi Prince stating "Of course I offered to fund a private deal"...

One thing for sure, never a dull-moment with this company. I'm not sure that's what I signed-up for when I bought shares, but it's what I've got.

Only regret, as usual, is having no spare cash to buy....

 

[bhtooefr]

Does he have a duty to option holders, though? Especially put option holders? (Other than the basic duties that anyone

About the only group that I see having any actual standing to claim damages is the longs that bought shares between 2018-08-07 12:48 Eastern time, and end of after-market trading 2018-08-24, under the expectation that Tesla would go private... except it wasn't guaranteed, even with funding secured. So there's no real standing there. (I mean, I actually did buy a couple shares that I would not have if it weren't for those tweets, expecting either to get bought out or go private with them... but I did that understanding the risk that the deal could fall through, so those losses are on me. My average is still under $300, and I was profiting decently overall before the SEC spun up this sugarstorm...)