TSLA Market Action: 2018 Investor Roundtable

[bdy0627]

In the SEC filing, on page 22, part II, SEC wants: "permanently restraining and enjoining Defendant from, directly or indirectly, engaging in conduct in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder"

I'm not a lawyer, but on Wikipedia, I found this informational regarding "SEC Rule 10b-5":

Language of the rule
"Rule 10b-5: Employment of Manipulative and Deceptive Practices":
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security."

Right below it, there is this section:

To establish a claim under Rule 10b-5, plaintiffs (including the SEC) must show (i) Manipulation or Deception (through misrepresentation and/or omission); (ii) Materiality; (iii) "In Connection With" the purchase or sale of securities, and (iv) Scienter. Private plaintiffs have the additional burden of establishing (v) Standing - Purchaser/Seller Requirement; (vi) Reliance (presumed if there was an omission); (vii) Loss Causation; and (viii) Damages.

and regarding "Scienter":

Negligence is not sufficient for a claim under 10b-5; plaintiffs or prosecutors must show at least recklessness, purpose, or knowledge.


Again, I'm not a laywer and I normally dont try to play one.. but my feeling is the SEC's case hinges on the whole premise that he was intentionally being fraudulent when he tweeted the things he did. Maybe I'm just dumb, but I just dont see Elon acting fraudulently.

source: SEC Rule 10b-5 - Wikipedia

Playing the other side, I would say there is at least a reasonable possibility of demonstrating that Elon was reckless with his announcements. In particular, point (b) seems pertinent in this case, in that Elon refrained from providing additional information that would demonstrate that he was in the beginning stage of evaluating the possibility of taking Tesla private and securing funding. By omitting that information, his statements could be construed as recklessly misleading. This would fall under deception by omission of pertinent information. Perhaps that is what they will contend.

 

[Quassinoid]

FROM EM: "This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

EM, I believe you, and you have my full support on this.

 

[gene]

How do you know this?

Because I will be in Santa Barbara helping.

 

[Dangleitus]

But there were buyers. Saudi Arabia bought a 5% stake in the company right before Elon's tweet. As Artful Dodger pointed out, that was what really spiked the stock price that day.

Maybe this SEC action was about saving face, but it most definitely isn't grounds to worry about the value of TSLA. Not when the company's so close to profitability and thus negating any concern about paying off the long-term debt.

I think that part of the swiftness of this is because the SEC is concerned with reputation. As I said earlier, what Musk posted on twitter was as public as you can get - and no buyer ever existed. If this is true, than he violated SEC regulations. Stock promoting was popularized in the late 20s by Michael Meehan, who was subsequently the first man charged under the than-new SEC Exchange Act of 1934 after the crash of 1929. The markets hurt many people those years because of those promotions as we well know now.

I expect the strength of ensuing lawsuits to be stronger now, and more actions forthcoming...

 

[bdy0627]

Well, no one (other than maybe the shorts, press and SEC) knows just how low it will go. But given the high volume in after hours trading I'll be surprised if it doesn't drop a lot more in the morning. I'm expecting it to go below 250.

Keep in mind this will be in the financial news tonight and in the morning. The hilarity of the filing will be glossed over. The serious nature of the accusation will be highlighted. The imminent death of Tesla will be exaggerated.

IMO the *worst* case for investors is that stock drops very low and is finally delisted. Expect that to be presented as *best* case. The news thrives on negativity and stocks sell on it.

I would be happy to be wrong -- though I won't mind snagging as many undervalued shares as I can.

Dropping so low that the stock is delisted??? Come on. There is a s*itstorm of FUD outside here. Let's not accentuate it please.

 

[Open Interest]

Because I will be in Santa Barbara helping.

Awesome, thank you!

 

[Artful Dodger]

If there is no AH circuit-breaker does that mean it will trip first thing tomorrow morning, and then limit the shorts all day Friday and Monday?

Good question. I wonder if the short selling rule applies only to the current trading day Opening price. So if that's the case, and Friday opens near $265 they would be unrestricted until -10% of that.

 

[Sudre]

If Elon beats this, will this help to put an end to all of the other class action suits against Tesla? If so, this could be a good thing.

No. This can be appealed by either side for many years. There is no winning or losing until Elon settles. This is just a way to crash TSLA whenever it is needed with a simple headline repeating the lawsuit or an appeal.

It might end if actual shareholders file a class action against the SEC. You will never see that in my opinion.

 

[Fact Checking]

Elon had good reason to believe that buyers did in fact exist. This is plain for anyone paying attention to see.

Evidence is also in the SEC filing itself:

19. According to Musk, at the meeting the Fund’s lead representative told Musk that
the Fund had recently acquired almost five percent of Tesla’s common stock on the open market, expressed interest in taking Tesla private, and confirmed that he was empowered to make investment decisions for the Fund. Musk later stated that he assumed without confirming that
the lead Fund representative was proposing a “standard” going-private transaction, but the terms of any such deal were not discussed.​

This was the basis for Elon's belief that funding was secured: the lead representative of a 2 trillion dollars sovereign fund told him that they would like to take Tesla private, and that they already bought a 5%, 2.5 billion dollars stake.

Elon was truthful when he said that he is "considering" taking Tesla private, and that funding was secured.

Two weeks later he reportedly also secured another source of funding, with the help of Silver Lake and Goldman Sachs.

The SEC is misconstruing the evidence by claiming that this was not enough basis to believe that funding was secure and inform investors about this effort.

 

[bdy0627]

More importantly, even the SEC doesn’t say no buyer existed to that point. They note that the Saudis did, indeed, meet with Musk and stated they were able to and willing to fund a go-private deal given any reasonable terms. The SEC’s objection seems to be to the fact that Elon assumed his terms would be reasonable to them, such that it was a sure thing.

I read it the same way. Musk's error was one of reckless assumption and omitting from his tweets that he was in the beginning stages of evaluating the possibility of taking Tesla private.

 

[CuriousSunbird]

Right, which means Elon realistically believed he had willing buyers. No intent to defraud investors, case closed.

I think the SEC may be differing from you on the definition of realistically.

Mod: Could be, but are they realistic?

 

[bhtooefr]

It's when it declines 10% or more from the prior day's closing.

So, my guess is, if it only applies while the market is open... if the market opens at $276.768 or less, it kicks in tomorrow morning at 9:30 Eastern.

 

[mongo]

Good question. I wonder if the short selling rule applies only to the current trading day Opening price. So if that's the case, and Friday opens near $265 they would be unrestricted until -10% of that.

It's the previous day's closing price. Unless there is some massive premarket buying tomorrow we are short free till Tuesday.
Press Release: SEC Approves Short Selling Restrictions; 2010-26; Feb. 24, 2010
Good luck shorts, Tesla can lowball/spitball production numbers before the open Monday.

 

[Do It]

There would be zero political blow-back. EM has managed to anger both parties.

There are ~300K tsla owners in the US, and many more investors and fans. Please call your congressman and senators to bring this matter to their attention. SEC suing Elon to prevent him from "being an officer in a public company" is not designed to protect investors, or even seek justice, but to destroy the most innovating company in the world for the benefit of shorts and many disrupted industries. Your congressman and senators needs to hear about this and know how you feel.

 

[EVNow]

In particular, the Democratic party in particular covers a range from pro-business (the former "moderate Republicans") all the way to socialists.

And, even if Musk angered some Democrats and people to the left of Democrats (he absolutely did), that doesn't mean that they're all supporting the death of Tesla.

The left bailed on Musk sometime back. The neo-liberal Dems bailed on him more recently (part of being in Trump created industry group, pedo etc like I posted sometime back). See Vox podcast as a good example.

While obviously not everyone supports "death of Tesla" - they won't also come to EM's defense (as they might have in earlier times).

For eg. see this tweet by Krugman and the responses. Yes, a lot of Krugman's followers liked it.

Paul Krugman on Twitter
ps :

Is there any prominent Dem who tweeted in support of EM ?

 

[Xpert]

Elon is finally killing his own company. This will be absolutely a killing day tomorrow. That *sugar* stock finally going to 0 and Musk to prison. At 230 this idiot needs to sell shares due to Margincalls .. Elon you're the biggest idiot I know of. God Damnit

Any mods around? Looks like this guy could use a permanent ban.

Mod: Deleted post some time ago.

 

[bdy0627]

It's the previous day's closing price. Unless there is some massive premarket buying tomorrow we are short free till Tuesday.
Press Release: SEC Approves Short Selling Restrictions; 2010-26; Feb. 24, 2010
Good luck shorts, Tesla can lowball/spitball production numbers before the open Monday.

Hmmm. This could be a bizarre few days, assuming longs want in at this point, especially if the stock starts to rally. I think the full fear effect is really only in place tomorrow, not a weekend and a day AFTER the announcement of this SEC litigation, particularly right before the deliveries announcement.

 

[KarenRei]

Any mods around? Looks like this guy could use a permanent ban.

If there were any, they would have banned him over a month ago.

If you want a mod to intervene, you need to track one down; they clearly don't read this thread. You have all of our support. He's a long-term astroturfer.

 

[TradingInvest]

I think that part of the swiftness of this is because the SEC is concerned with reputation. As I said earlier, what Musk posted on twitter was as public as you can get - and no buyer ever existed. If this is true, than he violated SEC regulations. Stock promoting was popularized in the late 20s by Michael Meehan, who was subsequently the first man charged under the than-new SEC Exchange Act of 1934 after the crash of 1929. The markets hurt many people those years because of those promotions as we well know now.

I expect the strength of ensuing lawsuits to be stronger now, and more actions forthcoming...

This is FUD. Saudi's sovereign fund wanted to take Tesla private. They talked to Elon Musk several times about taking Tesla private. If this part were not true, SEC would have mention this prominently in the lawsuit.

If a large sovereign fund wanted to take Tesla private and discussed with the CEO, I would consider that is funding secured. All they need the next step is the approval of the shareholders.

Edit: In my view, while a government agency usually has a valid point, they are not always right. Look no further than the current EPA.

 

[bdy0627]

Please everyone, consider using the ignore function. If you are against it, at least consider just using it temporarily. This is the kind of time when we need help cutting down on the crap posts that clutter this thread up. I really really appreciate intelligent, thoughtful, and even funny, posts, particularly at times like this. I despise having to wade through dozens and dozens of posts predicting the demise of longs/Tesla/Elon. There is plenty of that to be found elsewhere.