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Musk's "funding secured" tweet was incredibly irresponsible. Subsequent elaborations by Musk himself showed he had, at most, an initial expression of interest b

Musk's "funding secured" tweet was incredibly irresponsible. Subsequent elaborations by Musk himself showed he had, at most, an initial expression of interest by potential buyers. That tweet is at best an impulsive, reckless, perplexing action by a chief executive who should have known how to stay on the right side of securities law. At worst, it's an emotional attempt to fend off, possibly even cause direct financial loss to his many critics and short-sellers. This doesn't look good for him. This is the key paragraph in the article that makes it serious: > The subpoenas indicate senior SEC officials have authorized a formal investigation of the company, a step up from the initial inquiries the regulator made to Tesla last week. The SEC opens formal investigations when it thinks a violation of law has occurred and that a probe is justified given the nature of the suspected misconduct and the potential harm to investors. Unless Elon can suddenly show he had credible funding secured - contrary to his own blog post of last week - this looks like a strong case for the SEC: > “The release issued earlier Monday clearly raised at least as many questions as it hopes to answer. The probability that there will be an SEC enforcement action is, I think, quite high,” said Joseph Grundfest, a law professor at Stanford University and a former SEC commissioner. > Other experts agreed. John Coffee, a securities and corporate law professor at Columbia University, said the SEC can credibly argue that Mr. Musk’s tweet last week, which caused Tesla’s stock price to jump 11% the day he posted it, didn’t give shareholders the full picture they needed. > “This is a clear statement that he has nothing more than an expression of interest as opposed to a binding commitment,” Mr. Coffee said. “It will tell the SEC that they have a virtually open-and-shut case if they wish to sue.” https://www.wsj.com/articles/musks-tweets-on-tesla-buyout-face-scrutiny-after-saudi-disclosure-1534244400 https://www.wsj.com/articles/musks-tweets-on-tesla-buyout-fa... Besides the SEC, which can lead to both criminal and civil prosecution, there are also civil lawsuits filed in this case - three of them so far: https://www.businessinsider.com/tesla-hit-with-new-lawsuit-alleging-elon-musk-manipulated-stock-price-2018-8 https://www.businessinsider.com/tesla-hit-with-new-lawsuit-a...

deleted 8y ago
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adrr 8y ago
>Besides the SEC, which is a criminal investigation I thought SEC only has civil powers. SEC could force Musk out of Tesla but couldn't levy any criminal charges. Only the DOJ can bring criminal indictments. edit:grammar
- dunpeal 8y ago
  The investigation is about potential violation of federal securities law, which would be a criminal offense. If there is sufficient evidence of such criminal violation, the SEC will hand it over to the appropriate enforcement agency to prosecute it as a criminal case: > As an adjunct to the SEC's civil enforcement authority, the Division works closely with law enforcement agencies in the U.S. and around the world to bring criminal cases when appropriate. https://www.sec.gov/enforce/how-investigations-work.html https://www.sec.gov/enforce/how-investigations-work.html
  - towelr34dy 8y ago
    Unless of course there would exist a revolving door between SEC and the companies they are supposed to enforce action on. http://www.pogo.org/our-work/reports/sec-revolving-door.html http://www.pogo.org/our-work/reports/sec-revolving-door.html
    - rosser 8y ago
      The revolving door tends to be between the SEC and Wall Street. Tesla is a bit further down the road, as it were.
craftyguy 8y ago
The very next paragraph after the one you quoted makes it sound not quite as serious as you think: > SEC probes take months and sometimes years, and can be closed without legal action against a target if the SEC decides the evidence doesn’t merit filing charges. So at worst, it leads to a criminal investigation, and at best it's just something the SEC spends time/money on for a while before deciding to drop it.
- dunpeal 8y ago
  The paragraph you quoted applies equally to police investigations. They can also take "months" and don't always lead to prosecution. Would you say that means police investigations are therefore generally "not serious"? The key factor is the strength of the SEC's potential case, and several experts believe it looks strong: > “The release issued earlier Monday clearly raised at least as many questions as it hopes to answer. The probability that there will be an SEC enforcement action is, I think, quite high,” said Joseph Grundfest, a law professor at Stanford University and a former SEC commissioner. > Other experts agreed. John Coffee, a securities and corporate law professor at Columbia University, said the SEC can credibly argue that Mr. Musk’s tweet last week, which caused Tesla’s stock price to jump 11% the day he posted it, didn’t give shareholders the full picture they needed. > “This is a clear statement that he has nothing more than an expression of interest as opposed to a binding commitment,” Mr. Coffee said. “It will tell the SEC that they have a virtually open-and-shut case if they wish to sue.” https://www.wsj.com/articles/musks-tweets-on-tesla-buyout-face-scrutiny-after-saudi-disclosure-1534244400 https://www.wsj.com/articles/musks-tweets-on-tesla-buyout-fa...
ckastner 8y ago
I still almost can't believe that he'd be that reckless. He must have known how such a move -- and especially the "funding secured" tweet (where he doubled down with the going private certain pending shareholder vote) -- will be received but the SEC. Nothing gained, but instead an SEC investigation, numerous lawsuits, and even more short selling than before.
- deleted 8y ago
  [deleted]
- dunpeal 8y ago
  Me neither. My own comments here on HN when the story broke were very positive and impressed for that very reason: it would have been a great feat, buying back the company at 20% above than its present value, especially when he said early investors would have the option to stay in. It seemed like such a great move, the only problem being how to raise such a huge amount of money. But then he tweeted "funding secured", so that's very solid... I mean, he's a CEO, he knows securities law, he would never post something like that without good reason, right...? Now it just looks like one of his worst blunders. I believe most people don't even realize how bad it is yet. Based on all I'm reading, the SEC has a strong case, and so do the civil lawsuits. I'm not a psychologist, but the more I think about it, the more it seems like the type of ego-driven blunder you can only make when you're surrounded by people who worship at your feet 24/7.
  - coatmatter 8y ago
    It's hard to tell whether something is too good to be true in these unusual news cycles and market conditions. The market wasn't sure either (not that the market is always rational but I digress). Not only does it now appear to be one of his worst blunders, but it appears to come after a series of self-inflicted blunders. I really thought the false "pedo" accusation was completely awful for someone of his apparent standing, but even that seems to pale in consequence to what could now be ahead. If he thought things were hard then, they've only just gotten 10 times harder than ever before now. All because of "one"* Tweet. * More than one Tweet really; there's a pattern of behaviour here.
towelr34dy 8y ago
> This doesn't look good for him. Can I ask what you mean by this? Will the SEC arrest him? Ban him from being a Director of a public company? I keep hearing about him 'getting in big trouble'. But I don't get it. Don't get me wrong, I'm sure it is upsetting for him to possibly be forced to pay millions in fines and maybe even be kick off one of his projects. But that isn't a very big downside, and half of it isn't even from the SEC. I mean, there seems to be a pattern when it comes to the misbehavior of the ultra powerful: The upside to his action has the potential in the billions, while the potential IF caught is generally going to be a fine worth millions. He may have snubbed his board badly enough that they make him pay for this incident by removing his control of the project, but that is a separate matter. I feel whenever someone powerful is going to be punished the media goes crazy over every detail of the noodle that is going to be used as a whip.
- notatoad 8y ago
  >The upside to his action has the potential in the billions Sending a reckless and untruthful tweet does not have an upside in the billions. he could take tesla private without lying to investors.
- jeremyjh 8y ago
  I think there is a good chance he won't be in control of Tesla in 18 months. Prison is not out of the question.
  - leesec 8y ago
    Hmm, yeah, you know what now that you mention it there's loads of charismatic billionaires in prison for their tweets.
    - jacquesm 8y ago
      It's not the tweets, it is the effect they have on the stock price and that in turn can lead to losses with others or gains for Musk and either one of those can come back hard. See: https://en.wikipedia.org/wiki/Martha_Stewart#Stock_trading_case_and_conviction https://en.wikipedia.org/wiki/Martha_Stewart#Stock_trading_c... For how little it takes to get in serious hot water.
artursapek 8y ago
Elon must be going through some serious shit in his personal life considering his pathetic attention-seeking behavior on social media. It's kind of amazing how a man who is clearly so bright and talented can act like such a moron when given a way to instantly draw attention to himself.
- coatmatter 8y ago
  Some might think this is all gossip, but I think it could all be very relevant: https://www.nytimes.com/2018/08/16/business/elon-musk-interview-tesla.html https://www.nytimes.com/2018/08/16/business/elon-musk-interv... - Not sure what he expected to gain from this interview. https://www.businessinsider.com.au/who-is-amber-heard-dating-elon-musk-2017-4 https://www.businessinsider.com.au/who-is-amber-heard-dating... - An older article talking about Musk's loneliness vs happiness and by implication, effectiveness. https://www.vox.com/2018/8/16/17692700/azealia-banks-elon-musk-grimes-explained https://www.vox.com/2018/8/16/17692700/azealia-banks-elon-mu... - Just bizarre, and I don't mean Azealia. https://www.businessinsider.com.au/elon-musk-grimes-unfollowed-each-other-social-media-2018-8 https://www.businessinsider.com.au/elon-musk-grimes-unfollow... - Why? As ridiculous as it all might sound to non-social networking people, taken together it all starts to look messier and messier. It's beyond celebrity gossip now. I can't see how any of this is good for business.
icaexahh 8y ago
> Besides the SEC, which is a criminal investigation, there are also civil lawsuits filed in this case - three of them so far: http://www.haynesboone.com/Publications/criminal-enforcement-of-the-us-securities-laws http://www.haynesboone.com/Publications/criminal-enforcement... > The United States securities laws are enforced through both civil and criminal actions. On the civil side, the Securities and Exchange Commission (“SEC”) has broad investigative powers and can bring civil enforcement actions seeking monetary penalties, injunctions, bars against serving as a director or officer of a public company, and other civil remedies. The SEC’s civil enforcement is supplemented by the activities of self-regulatory organizations such as the major stock exchanges, state securities regulators, and private litigants. The SEC does not have authority to bring criminal actions. Criminal violations of the federal securities laws are prosecuted by the Department of Justice and the ninety three United States Attorneys offices throughout the country (collectively the “DOJ”). The DOJ may seek indictments for criminal violations of the securities laws on their own initiative or through formal or informal referrals from the SEC. This paper, presented to the Union Internationale des Avocats Winter Meeting on Claims Management, Torts and Litigation of Claims, focuses on the criminal enforcement of the U.S. securities laws.
- deleted 8y ago
  [deleted]

deleted 8y ago

[deleted]

adrr 8y ago

>Besides the SEC, which is a criminal investigation I thought SEC only has civil powers. SEC could force Musk out of Tesla but couldn't levy any criminal charges. Only the DOJ can bring criminal indictments. edit:grammar

dunpeal 8y ago
The investigation is about potential violation of federal securities law, which would be a criminal offense. If there is sufficient evidence of such criminal violation, the SEC will hand it over to the appropriate enforcement agency to prosecute it as a criminal case: > As an adjunct to the SEC's civil enforcement authority, the Division works closely with law enforcement agencies in the U.S. and around the world to bring criminal cases when appropriate. https://www.sec.gov/enforce/how-investigations-work.html https://www.sec.gov/enforce/how-investigations-work.html
- towelr34dy 8y ago
  Unless of course there would exist a revolving door between SEC and the companies they are supposed to enforce action on. http://www.pogo.org/our-work/reports/sec-revolving-door.html http://www.pogo.org/our-work/reports/sec-revolving-door.html
  - rosser 8y ago
    The revolving door tends to be between the SEC and Wall Street. Tesla is a bit further down the road, as it were.

craftyguy 8y ago

The very next paragraph after the one you quoted makes it sound not quite as serious as you think: > SEC probes take months and sometimes years, and can be closed without legal action against a target if the SEC decides the evidence doesn’t merit filing charges. So at worst, it leads to a criminal investigation, and at best it's just something the SEC spends time/money on for a while before deciding to drop it.

dunpeal 8y ago
The paragraph you quoted applies equally to police investigations. They can also take "months" and don't always lead to prosecution. Would you say that means police investigations are therefore generally "not serious"? The key factor is the strength of the SEC's potential case, and several experts believe it looks strong: > “The release issued earlier Monday clearly raised at least as many questions as it hopes to answer. The probability that there will be an SEC enforcement action is, I think, quite high,” said Joseph Grundfest, a law professor at Stanford University and a former SEC commissioner. > Other experts agreed. John Coffee, a securities and corporate law professor at Columbia University, said the SEC can credibly argue that Mr. Musk’s tweet last week, which caused Tesla’s stock price to jump 11% the day he posted it, didn’t give shareholders the full picture they needed. > “This is a clear statement that he has nothing more than an expression of interest as opposed to a binding commitment,” Mr. Coffee said. “It will tell the SEC that they have a virtually open-and-shut case if they wish to sue.” https://www.wsj.com/articles/musks-tweets-on-tesla-buyout-face-scrutiny-after-saudi-disclosure-1534244400 https://www.wsj.com/articles/musks-tweets-on-tesla-buyout-fa...

ckastner 8y ago

I still almost can't believe that he'd be that reckless. He must have known how such a move -- and especially the "funding secured" tweet (where he doubled down with the going private certain pending shareholder vote) -- will be received but the SEC. Nothing gained, but instead an SEC investigation, numerous lawsuits, and even more short selling than before.

deleted 8y ago
[deleted]
dunpeal 8y ago
Me neither. My own comments here on HN when the story broke were very positive and impressed for that very reason: it would have been a great feat, buying back the company at 20% above than its present value, especially when he said early investors would have the option to stay in. It seemed like such a great move, the only problem being how to raise such a huge amount of money. But then he tweeted "funding secured", so that's very solid... I mean, he's a CEO, he knows securities law, he would never post something like that without good reason, right...? Now it just looks like one of his worst blunders. I believe most people don't even realize how bad it is yet. Based on all I'm reading, the SEC has a strong case, and so do the civil lawsuits. I'm not a psychologist, but the more I think about it, the more it seems like the type of ego-driven blunder you can only make when you're surrounded by people who worship at your feet 24/7.
- coatmatter 8y ago
  It's hard to tell whether something is too good to be true in these unusual news cycles and market conditions. The market wasn't sure either (not that the market is always rational but I digress). Not only does it now appear to be one of his worst blunders, but it appears to come after a series of self-inflicted blunders. I really thought the false "pedo" accusation was completely awful for someone of his apparent standing, but even that seems to pale in consequence to what could now be ahead. If he thought things were hard then, they've only just gotten 10 times harder than ever before now. All because of "one"* Tweet. * More than one Tweet really; there's a pattern of behaviour here.

towelr34dy 8y ago

> This doesn't look good for him. Can I ask what you mean by this? Will the SEC arrest him? Ban him from being a Director of a public company? I keep hearing about him 'getting in big trouble'. But I don't get it. Don't get me wrong, I'm sure it is upsetting for him to possibly be forced to pay millions in fines and maybe even be kick off one of his projects. But that isn't a very big downside, and half of it isn't even from the SEC. I mean, there seems to be a pattern when it comes to the misbehavior of the ultra powerful: The upside to his action has the potential in the billions, while the potential IF caught is generally going to be a fine worth millions. He may have snubbed his board badly enough that they make him pay for this incident by removing his control of the project, but that is a separate matter. I feel whenever someone powerful is going to be punished the media goes crazy over every detail of the noodle that is going to be used as a whip.

notatoad 8y ago
>The upside to his action has the potential in the billions Sending a reckless and untruthful tweet does not have an upside in the billions. he could take tesla private without lying to investors.
jeremyjh 8y ago
I think there is a good chance he won't be in control of Tesla in 18 months. Prison is not out of the question.
- leesec 8y ago
  Hmm, yeah, you know what now that you mention it there's loads of charismatic billionaires in prison for their tweets.
  - jacquesm 8y ago
    It's not the tweets, it is the effect they have on the stock price and that in turn can lead to losses with others or gains for Musk and either one of those can come back hard. See: https://en.wikipedia.org/wiki/Martha_Stewart#Stock_trading_case_and_conviction https://en.wikipedia.org/wiki/Martha_Stewart#Stock_trading_c... For how little it takes to get in serious hot water.

artursapek 8y ago

Elon must be going through some serious shit in his personal life considering his pathetic attention-seeking behavior on social media. It's kind of amazing how a man who is clearly so bright and talented can act like such a moron when given a way to instantly draw attention to himself.

coatmatter 8y ago
Some might think this is all gossip, but I think it could all be very relevant: https://www.nytimes.com/2018/08/16/business/elon-musk-interview-tesla.html https://www.nytimes.com/2018/08/16/business/elon-musk-interv... - Not sure what he expected to gain from this interview. https://www.businessinsider.com.au/who-is-amber-heard-dating-elon-musk-2017-4 https://www.businessinsider.com.au/who-is-amber-heard-dating... - An older article talking about Musk's loneliness vs happiness and by implication, effectiveness. https://www.vox.com/2018/8/16/17692700/azealia-banks-elon-musk-grimes-explained https://www.vox.com/2018/8/16/17692700/azealia-banks-elon-mu... - Just bizarre, and I don't mean Azealia. https://www.businessinsider.com.au/elon-musk-grimes-unfollowed-each-other-social-media-2018-8 https://www.businessinsider.com.au/elon-musk-grimes-unfollow... - Why? As ridiculous as it all might sound to non-social networking people, taken together it all starts to look messier and messier. It's beyond celebrity gossip now. I can't see how any of this is good for business.

icaexahh 8y ago

> Besides the SEC, which is a criminal investigation, there are also civil lawsuits filed in this case - three of them so far: http://www.haynesboone.com/Publications/criminal-enforcement-of-the-us-securities-laws http://www.haynesboone.com/Publications/criminal-enforcement... > The United States securities laws are enforced through both civil and criminal actions. On the civil side, the Securities and Exchange Commission (“SEC”) has broad investigative powers and can bring civil enforcement actions seeking monetary penalties, injunctions, bars against serving as a director or officer of a public company, and other civil remedies. The SEC’s civil enforcement is supplemented by the activities of self-regulatory organizations such as the major stock exchanges, state securities regulators, and private litigants. The SEC does not have authority to bring criminal actions. Criminal violations of the federal securities laws are prosecuted by the Department of Justice and the ninety three United States Attorneys offices throughout the country (collectively the “DOJ”). The DOJ may seek indictments for criminal violations of the securities laws on their own initiative or through formal or informal referrals from the SEC. This paper, presented to the Union Internationale des Avocats Winter Meeting on Claims Management, Torts and Litigation of Claims, focuses on the criminal enforcement of the U.S. securities laws.

deleted 8y ago
[deleted]