7 ms·

Elon Musk faces investor lawsuit

21 points by osrec 8y ago

jacknews 8y ago
Did no-one pick up on the proposed price, 420 ? Maybe he should have settled for 419
- F_r_k 8y ago
  Curious question: what's wrong with 420$/share ?
  - a_humean 8y ago
    As indirectly explained by others, 420 is a drug reference about getting high on cannabis. The thinking here is Musk deliberately lied in public and/or was joking in public about the financials of his publicly listed company - potentially out of malice to disrupt the day traders that he frequently criticises on twitter and in quarterly report conference calls. Unless he has evidence that some kind of deal existed that could be construed of as "secured", then he broke the law and there will be lots of short sellers with standing to sue for compensation.
    - wand3r 8y ago
      Reid Hasting lawsuit did hold that you can make announcements via socials (facebook in his case) and while you’re correct im not sure what the burden of proof for “secured” is. He could take Solar City private or potentially a piece of the company private. An IOI/LOI the Saudis or SoftBank could suffice but im not a lawyer of course. I suspect this wont count as a crime and given Musks position in the company he holds the cards. If he stepped down those investors would take a beating atleast for the foreseeable future.
      - chibg10 8y ago
        This misses the point I think. The issue is less that he used Twitter, and more that it's illegal for a CEO to manipulate the stock price by (potentially in this case) making misleading and/or false claims. If Musk e.g. didn't actually have funding secured (may or may not be true), it seems to me like a lawsuit might be appropriate.
        guiambros 8y ago
        For all the doubters here thinking that there's nothing wrong with Musk making some jokes on twitter, go read Matt Levine's Money Stuff column on Bloomberg this week. Not only it explains in detail what's wrong, but it's also high entertainment value (as all his columns. Also the follow-up yesterday [2] is a good summary of the possible solutions for Musk. TL;DR: > If I were Musk’s lawyer, and if he doesn’t actually have $80 billion of financing locked up, I’d be working on a termsheet for the board that (1) offers Tesla shareholders the choice between (A) $420 in cash or (B) shares in a new special-purpose-vehicle that will hold shares in a private Tesla (or whatever your plan is to let people hold on to their shares); (2) limits the cash consideration to, like, $5 billion, or whatever Musk can actually raise; and (3) has some sort of proration mechanism in case more people choose the cash than he can afford. > Does this fit with the spirit of the going-private transaction that Musk tweeted about? No, absolutely not, not even a little bit. But it is … something. And then let the special committee reject it, and then quietly walk away and say “well no we were serious about the buyout proposal but it just didn’t work out.” Which is a much better position to be in than walking away saying “oh yeah sorry we were kidding about that.” [1] https://www.bloomberg.com/view/articles/2018-08-08/elon-musk-has-some-fun-with-tesla https://www.bloomberg.com/view/articles/2018-08-08/elon-musk... [2] https://www.bloomberg.com/view/articles/2018-08-10/tesla-does-some-going-private-stuff https://www.bloomberg.com/view/articles/2018-08-10/tesla-doe...
  - crunchlibrarian 8y ago
    Well he was going to sell for $69 a share but then he tried $666 a share but that was too high so they settled on $420. The point is Musk is looking increasingly like a joke, which is not what you really want in a massive company that is hemorrhaging money and could actually collapse if Model 3 demand doesn't pick up.
    - osrec 8y ago
      I agree. He's a talented guy, but a victim of his own grandiose imagination. I think he'll probably pull through, but he might have had more success as a respected, humble, private company, rather than trying to take public stage with his boastful showmanship at every occasion. Also the under-delivering (while still delivering a lot in actual terms) is starting to grow tiresome. Maybe it's the introvert in me talking, but I would certainly respect him a lot more if he made smaller claims and let his results speak for themselves.
      - chibg10 8y ago
        I agree with you, but I wonder how much of (imo tiresome) antics are part of an intentional strategy. Deserved or not, Musk has an enormous fanbase because of his showmanship/public persona/whatever. My hunch is that this is net positive among Tesla's potential customers and probably has been net positive in terms of attracting capital as well. The latter is becoming somewhat more debatable lately though given Musk's somewhat erratic behavior I think. Personally as an investor, Musk's behavior looks uncomfortably to me like how Enron's CEO was behaving near the end (though I would object to any other serious comparisons between Enron and Tesla as businesses).
        nickik 8y ago
        Or maybe he has fans because he has pushed the almost dead rocket industry and space into a new age. I never particularly liked him as a person, but I like him because of what he actually does.
    - jmpman 8y ago
      The backlog of Model 3 reservations is rumored to be over 400,000. Of course I’ve never seen the split out of reservations for $35k variant versus the currently available $50k+ variety. (Yes it would be possible for Tesla to calculate the demand signal even though people waiting for a $35k variety look like customers that haven’t use the configurator) My hypothesis is that his financial model needs more customers of the $50k variety, isn’t seeing the demand, and needs to quickly go private before the cash flow becomes problematic again. The evidence I have to support this hypothesis is the lead time for recent dual motor Model 3. It’s very short. Once that demand dries up, all that’s left is a horde of angry masses waiting for their $35k car that they were expecting to arrive with a $7500 tax credit. Of course my hypothesis is ignoring international sales, which may provide a large enough buffer of premium model demand to keep this ship afloat.
  - jacknews 8y ago
    I'm joking - you could just google those numbers. But maybe Musk was too.
- mseidl 8y ago
  I'll sell those shares for 419.99
baybal2 8y ago
>Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. So, what's the point? I think it very well did, but how that's a crime? It is like music companies suing Napster for them going bankrupt. Or for a person who bet on a losing horse to sue the winner for making him "loose money."
- malshe 8y ago
  The point is actually in the next line :"His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and _artificially_ inflating Tesla's share price."
  - wand3r 8y ago
    Short sellers artificially devalue Tesla’s price (and many companies that ate shorted) and thats part of the game. Tesla is actually structured as a financial company, especially with SCTY being combined. The easiest way to destabalize a financial company is destroy counterparty trust. There was a video about the Tesla shorts doing this to other smaller less well known firms. Both media blitzs by Shorts and Musk are questionable but thats how it works.
    - gamblor956 8y ago
      That's not at all how it works. Musk is the CEO of Tesla and made a public statement. Under US and EU securities laws, if he lied in the tweet, he's liable for the losses of anyone who traded (or didn't trade) based on the tweet, whether or not they were a short seller. Shorts don't speak for the company. While releasing false information for the purposes of manipulating stock prices is illegal, none of the Tesla shorts have been proven to have done so.
Leary 8y ago
Funding secured
jiveturkey 8y ago
there is a small chance he’s playing a game. by not saying more about the funding , he’s fishing for a lawsuit that he expects to win. unlikely but possible.
- gamblor956 8y ago
  I know techies like to think that Elon is somehow getting out of this, but legally, if the funding was not secured in full at the time of the tweet, he's fucked under US and EU securities law. And no one in their right mind tries to fish for a lawsuit. They are expensive, time consuming, and distracting.
  - talltimtom 8y ago
    Why would it have to be secured in full? He wrote “funding secured” that just implies a non-zero level of funding.
    - gamblor956 8y ago
      No, it implies that all the necessary funding was secured because he didn't qualify his statement. Not announcing that they did not have full funding would have been a material omission under securities laws and would have been just as actionable legally speaking.
      - londons_explore 8y ago
        His claim that existing shareholders can keep their stake could mean the projected amount of funding required is very small. It could mean his personal bank account could cover it.
  - bob_theslob646 8y ago
    Can you quote or share said law that you speak of?
csomar 8y ago
Even if the funding is secured, isn't this what "Inside Trading" is about? I really wonder if Elon is aware about what he is exactly doing.
- unmole 8y ago
  Insider trading is trading using non-public information that you had a duty to protect. So, whatever Musk is (allegedly) doing is not insider trading. It could however still be securities fraud.
  - csomar 8y ago
    He is using non-public information to liquidate shorters. Isn't that it?
    - nickik 8y ago
      No. He is allowed to announce company plans on Twitter. When he said it, it became public and that is legal.
davesque 8y ago
It's surreal to watch Musk throw away his reputation and success so quickly and casually. Then again, a lot of things have seemed pretty surreal lately. Welcome to the brave new world of post-reality.
- nickik 8y ago
  He still has his success, unless you actually believe that this lawsuit will bring down the whole company. Also, SpaceX will not be effected. In terms of his reputation we will see, but most people don't care about obscure stock manipulate rules that he might or might not have violated. You are way overstating your case.
  - davesque 8y ago
    I'm really not. Anyone who's been paying attention lately has seen his behavior become more erratic. It doesn't matter if you're familiar with the vagueries of securities law.

21 points by osrec 8y ago

jacknews 8y ago

Did no-one pick up on the proposed price, 420 ? Maybe he should have settled for 419

F_r_k 8y ago
Curious question: what's wrong with 420$/share ?
- a_humean 8y ago
  As indirectly explained by others, 420 is a drug reference about getting high on cannabis. The thinking here is Musk deliberately lied in public and/or was joking in public about the financials of his publicly listed company - potentially out of malice to disrupt the day traders that he frequently criticises on twitter and in quarterly report conference calls. Unless he has evidence that some kind of deal existed that could be construed of as "secured", then he broke the law and there will be lots of short sellers with standing to sue for compensation.
  - wand3r 8y ago
    Reid Hasting lawsuit did hold that you can make announcements via socials (facebook in his case) and while you’re correct im not sure what the burden of proof for “secured” is. He could take Solar City private or potentially a piece of the company private. An IOI/LOI the Saudis or SoftBank could suffice but im not a lawyer of course. I suspect this wont count as a crime and given Musks position in the company he holds the cards. If he stepped down those investors would take a beating atleast for the foreseeable future.
    - chibg10 8y ago
      This misses the point I think. The issue is less that he used Twitter, and more that it's illegal for a CEO to manipulate the stock price by (potentially in this case) making misleading and/or false claims. If Musk e.g. didn't actually have funding secured (may or may not be true), it seems to me like a lawsuit might be appropriate.
      - guiambros 8y ago
        For all the doubters here thinking that there's nothing wrong with Musk making some jokes on twitter, go read Matt Levine's Money Stuff column on Bloomberg this week. Not only it explains in detail what's wrong, but it's also high entertainment value (as all his columns. Also the follow-up yesterday [2] is a good summary of the possible solutions for Musk. TL;DR: > If I were Musk’s lawyer, and if he doesn’t actually have $80 billion of financing locked up, I’d be working on a termsheet for the board that (1) offers Tesla shareholders the choice between (A) $420 in cash or (B) shares in a new special-purpose-vehicle that will hold shares in a private Tesla (or whatever your plan is to let people hold on to their shares); (2) limits the cash consideration to, like, $5 billion, or whatever Musk can actually raise; and (3) has some sort of proration mechanism in case more people choose the cash than he can afford. > Does this fit with the spirit of the going-private transaction that Musk tweeted about? No, absolutely not, not even a little bit. But it is … something. And then let the special committee reject it, and then quietly walk away and say “well no we were serious about the buyout proposal but it just didn’t work out.” Which is a much better position to be in than walking away saying “oh yeah sorry we were kidding about that.” [1] https://www.bloomberg.com/view/articles/2018-08-08/elon-musk-has-some-fun-with-tesla https://www.bloomberg.com/view/articles/2018-08-08/elon-musk... [2] https://www.bloomberg.com/view/articles/2018-08-10/tesla-does-some-going-private-stuff https://www.bloomberg.com/view/articles/2018-08-10/tesla-doe...
- crunchlibrarian 8y ago
  Well he was going to sell for $69 a share but then he tried $666 a share but that was too high so they settled on $420. The point is Musk is looking increasingly like a joke, which is not what you really want in a massive company that is hemorrhaging money and could actually collapse if Model 3 demand doesn't pick up.
  - osrec 8y ago
    I agree. He's a talented guy, but a victim of his own grandiose imagination. I think he'll probably pull through, but he might have had more success as a respected, humble, private company, rather than trying to take public stage with his boastful showmanship at every occasion. Also the under-delivering (while still delivering a lot in actual terms) is starting to grow tiresome. Maybe it's the introvert in me talking, but I would certainly respect him a lot more if he made smaller claims and let his results speak for themselves.
    - chibg10 8y ago
      I agree with you, but I wonder how much of (imo tiresome) antics are part of an intentional strategy. Deserved or not, Musk has an enormous fanbase because of his showmanship/public persona/whatever. My hunch is that this is net positive among Tesla's potential customers and probably has been net positive in terms of attracting capital as well. The latter is becoming somewhat more debatable lately though given Musk's somewhat erratic behavior I think. Personally as an investor, Musk's behavior looks uncomfortably to me like how Enron's CEO was behaving near the end (though I would object to any other serious comparisons between Enron and Tesla as businesses).
      - nickik 8y ago
        Or maybe he has fans because he has pushed the almost dead rocket industry and space into a new age. I never particularly liked him as a person, but I like him because of what he actually does.
  - jmpman 8y ago
    The backlog of Model 3 reservations is rumored to be over 400,000. Of course I’ve never seen the split out of reservations for $35k variant versus the currently available $50k+ variety. (Yes it would be possible for Tesla to calculate the demand signal even though people waiting for a $35k variety look like customers that haven’t use the configurator) My hypothesis is that his financial model needs more customers of the $50k variety, isn’t seeing the demand, and needs to quickly go private before the cash flow becomes problematic again. The evidence I have to support this hypothesis is the lead time for recent dual motor Model 3. It’s very short. Once that demand dries up, all that’s left is a horde of angry masses waiting for their $35k car that they were expecting to arrive with a $7500 tax credit. Of course my hypothesis is ignoring international sales, which may provide a large enough buffer of premium model demand to keep this ship afloat.
- jacknews 8y ago
  I'm joking - you could just google those numbers. But maybe Musk was too.
mseidl 8y ago
I'll sell those shares for 419.99

baybal2 8y ago

>Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. So, what's the point? I think it very well did, but how that's a crime? It is like music companies suing Napster for them going bankrupt. Or for a person who bet on a losing horse to sue the winner for making him "loose money."

malshe 8y ago
The point is actually in the next line :"His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and _artificially_ inflating Tesla's share price."
- wand3r 8y ago
  Short sellers artificially devalue Tesla’s price (and many companies that ate shorted) and thats part of the game. Tesla is actually structured as a financial company, especially with SCTY being combined. The easiest way to destabalize a financial company is destroy counterparty trust. There was a video about the Tesla shorts doing this to other smaller less well known firms. Both media blitzs by Shorts and Musk are questionable but thats how it works.
  - gamblor956 8y ago
    That's not at all how it works. Musk is the CEO of Tesla and made a public statement. Under US and EU securities laws, if he lied in the tweet, he's liable for the losses of anyone who traded (or didn't trade) based on the tweet, whether or not they were a short seller. Shorts don't speak for the company. While releasing false information for the purposes of manipulating stock prices is illegal, none of the Tesla shorts have been proven to have done so.

Leary 8y ago

Funding secured

jiveturkey 8y ago

there is a small chance he’s playing a game. by not saying more about the funding , he’s fishing for a lawsuit that he expects to win. unlikely but possible.

gamblor956 8y ago
I know techies like to think that Elon is somehow getting out of this, but legally, if the funding was not secured in full at the time of the tweet, he's fucked under US and EU securities law. And no one in their right mind tries to fish for a lawsuit. They are expensive, time consuming, and distracting.
- talltimtom 8y ago
  Why would it have to be secured in full? He wrote “funding secured” that just implies a non-zero level of funding.
  - gamblor956 8y ago
    No, it implies that all the necessary funding was secured because he didn't qualify his statement. Not announcing that they did not have full funding would have been a material omission under securities laws and would have been just as actionable legally speaking.
    - londons_explore 8y ago
      His claim that existing shareholders can keep their stake could mean the projected amount of funding required is very small. It could mean his personal bank account could cover it.
- bob_theslob646 8y ago
  Can you quote or share said law that you speak of?

csomar 8y ago

Even if the funding is secured, isn't this what "Inside Trading" is about? I really wonder if Elon is aware about what he is exactly doing.

unmole 8y ago
Insider trading is trading using non-public information that you had a duty to protect. So, whatever Musk is (allegedly) doing is not insider trading. It could however still be securities fraud.
- csomar 8y ago
  He is using non-public information to liquidate shorters. Isn't that it?
  - nickik 8y ago
    No. He is allowed to announce company plans on Twitter. When he said it, it became public and that is legal.

davesque 8y ago

It's surreal to watch Musk throw away his reputation and success so quickly and casually. Then again, a lot of things have seemed pretty surreal lately. Welcome to the brave new world of post-reality.

nickik 8y ago
He still has his success, unless you actually believe that this lawsuit will bring down the whole company. Also, SpaceX will not be effected. In terms of his reputation we will see, but most people don't care about obscure stock manipulate rules that he might or might not have violated. You are way overstating your case.
- davesque 8y ago
  I'm really not. Anyone who's been paying attention lately has seen his behavior become more erratic. It doesn't matter if you're familiar with the vagueries of securities law.