4 ms·

Nah, it's clear Musk hates short sellers. That's not the issue. Nor is his desire to hurt them. The question is whether he had scienter when misstating the fina

Nah, it's clear Musk hates short sellers. That's not the issue. Nor is his desire to hurt them. The question is whether he had scienter when misstating the finality of the deal he was negotiating.

JumpCrisscross 8y ago
> That's not the issue. Nor is his desire to hurt them. That's a huge issue. If he made his misstatements with the intent of hurting short sellers, that's criminal fraud. If he just made a material misstatement, with no intent to harm anyone, it's a civil case.
- abalone 8y ago
  You inserted "intent". That is the key question, not whether he dislikes short sellers. Every CEO dislikes short sellers, and nearly every CEO makes "material misstatements" now and then. What separates that from fraud is what the SEC focused on in their comment: scienter.
  - gamblor956 8y ago
    You keep throwing around the word "scienter" without understanding what it is. Scienter just means intent. It's literally just the fancy legal term for intent. Thus, it matters very much that Musk has a history of trashing short sellers and wishing harm to them, because they can use that history to establish that his tweet was made with the intent to defraud market participants and materially affect the price of Tesla's stock. Especially the "funding secured" bit. You don't say "secured" if it's not really secured. There is no legal interpretation where "secured" is a harmless mistake.
    - abalone 8y ago
      I have been using scienter and intentionality interchangeably. I think it is you who is throwing around fancy-sounding terms like "legal interpretation" without really knowing what they mean. Again, every CEO dislikes short sellers and literally everything they do to talk up the company hurts shorts, by definition. You don't need any tweets to establish that. It's a given. And every CEO misstates things and makes errors and in big companies every statement moves the stock price. The issue is intent. What you are doing is focusing on the misstatement, adding in fancy sounding terms like "legal interpretation", and whipping that up into intent to defraud. But as the SEC explicitly addressed in the cited comment, they set the "state of mind" bar higher than mere misstatements. You are going to need more than that to establish scienter. Your fancy term aside, there actually are other interpretations of his comment. He may have been overzealous. He may have overestimated his investors intent. Let's look at it another way. Musk is a reasonably smart guy. How far was he going to get with this alleged scheme to intentionally defraud the market? How long until everyone realized the funds were not actually secured and the fraud was revealed? Like, 2 hours? That would be the stupidest fraud in the history of frauds. The conclusion is that, perhaps he actually believed the deal would come together. Erroneously, but erroneous statements are not enough for fraud; the key factor is state of mind.

Nah, it's clear Musk hates short sellers. That's not the issue. Nor is his desire to hurt them. The question is whether he had scienter when misstating the finality of the deal he was negotiating.

JumpCrisscross 8y ago

> That's not the issue. Nor is his desire to hurt them. That's a huge issue. If he made his misstatements with the intent of hurting short sellers, that's criminal fraud. If he just made a material misstatement, with no intent to harm anyone, it's a civil case.

abalone 8y ago
You inserted "intent". That is the key question, not whether he dislikes short sellers. Every CEO dislikes short sellers, and nearly every CEO makes "material misstatements" now and then. What separates that from fraud is what the SEC focused on in their comment: scienter.
- gamblor956 8y ago
  You keep throwing around the word "scienter" without understanding what it is. Scienter just means intent. It's literally just the fancy legal term for intent. Thus, it matters very much that Musk has a history of trashing short sellers and wishing harm to them, because they can use that history to establish that his tweet was made with the intent to defraud market participants and materially affect the price of Tesla's stock. Especially the "funding secured" bit. You don't say "secured" if it's not really secured. There is no legal interpretation where "secured" is a harmless mistake.
  - abalone 8y ago
    I have been using scienter and intentionality interchangeably. I think it is you who is throwing around fancy-sounding terms like "legal interpretation" without really knowing what they mean. Again, every CEO dislikes short sellers and literally everything they do to talk up the company hurts shorts, by definition. You don't need any tweets to establish that. It's a given. And every CEO misstates things and makes errors and in big companies every statement moves the stock price. The issue is intent. What you are doing is focusing on the misstatement, adding in fancy sounding terms like "legal interpretation", and whipping that up into intent to defraud. But as the SEC explicitly addressed in the cited comment, they set the "state of mind" bar higher than mere misstatements. You are going to need more than that to establish scienter. Your fancy term aside, there actually are other interpretations of his comment. He may have been overzealous. He may have overestimated his investors intent. Let's look at it another way. Musk is a reasonably smart guy. How far was he going to get with this alleged scheme to intentionally defraud the market? How long until everyone realized the funds were not actually secured and the fraud was revealed? Like, 2 hours? That would be the stupidest fraud in the history of frauds. The conclusion is that, perhaps he actually believed the deal would come together. Erroneously, but erroneous statements are not enough for fraud; the key factor is state of mind.