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Tesla’s Musk pulled the plug on a settlement with the SEC at the last minute

98 points by justin66 8y ago

remote_phone 8y ago
Musk continues to make very, very poor decisions, over this last year. If his decision-making for things like this are so poor, I can only imagine how poor his decisions are behind the scenes for things concerning Tesla itself. I wonder what happened. My guess is that he must be on some sort of medication due to his battle with the Model 3. The tweet in question was inexplicable and I was very tempted to short the stock when I heard, but I didn’t want to bet against Musk. Now he seems mentally so fragile and his ability to lead Tesla is seriously in doubt.
- vertline3 8y ago
  The "who wears short shorts" music video he linked is where I started to think the shorts were really getting to him. In his defense there was a lot of negative spin likely originating from his short sellers, who had the largest short position of any stock I think. Most companies CEOs are really careful and always act like nothing is wrong even as the ship sinks. In interviews Musk was refusing to answer certain questions from reporters accusing them of being from his short sellers, it all makes me wonder if the financials aren't so rosy.
  - nostrebored 8y ago
    How is it spin? The metrics for Tesla were/are not promising and they were already being looked at by the sec for potential fraud regarding those metrics
    - vertline3 8y ago
      It becomes spin when several stories are floated in order to erode confidence in the company. Musk's accusations were that much of the negative press was coming from shorts or competitive rivals, wether that be energy companies or car companies. The truth for me lies in between.
- api 8y ago
  Rumor is that he's been on a stimulants / sleep aids cycle working ludicrous hours. You can only sustain that for so long before your brain throws a rod and starts banging and chugging and emitting a lot of smoke. There are tweets in support of this, like him talking about Ambien. https://www.cnet.com/news/elon-musks-strange-strange-ambien-tweet/ https://www.cnet.com/news/elon-musks-strange-strange-ambien-... Ambien is known to produce some weird states of mind. I used it briefly and can attest to this, though I never got a visit from the walrus: https://ambien.blogspot.com/2010/12/ambien-walrus-collection.html https://ambien.blogspot.com/2010/12/ambien-walrus-collection... I admire Elon a lot, and I hope he takes a break and gets his head sorted. When I first heard about the tweets causing the SEC to sue I speculated to my wife that his subconscious mind had engineered this event to force him to take a break as some kind of mental self-preservation circuit breaker.
  - dahdum 8y ago
    Rosanne blamed Ambien, and I wouldn’t be surprised if more public figures do. It’s a convenient scapegoat that doesn’t injure their reputation like admitting hard drug use or alcohol abuse would. Musk couldn’t have been thinking straight when he sent that tweet, but we’ll likely never know the real story. I think that’s OK, he’s entitled to some personal privacy too.
- MrEfficiency 8y ago
  I keep thinking he MUST be smart right? Or did he get a winfall on Paypal and now throws a bunch of money at talented engineers? I remind myself smart engineers might not be talented leaders.
- amluto 8y ago
  I’m not sure medication needs to be involved. I don’t care how superhuman you might think you are, if you work 100+ hour weeks for that long, it’s going to mess with your mental state.
  - andreygrehov 8y ago
    I'm pretty sure the 100+ hour workweek is a fairytale, the kind of marketing for Elon himself.
    - kamaal 8y ago
      That's like 14 hours per day. You will be surprised how many people in developing and under-developed countries put in that kind of effort without breaking a sweat. 40 hour work weeks are the luxury of developed first world countries.
      - andreygrehov 8y ago
        I'm not sure what kind of work and what countries specifically you are referring to, but my guess is that you're talking about a physical work, which is not comparable to mental work, that dominates Elon's day. It's not like he's making decisions 14 hours in a row. He's jumping between companies and various meetings. He eats. He drinks coffee. It all deducts. If you meant something else, feel free to clarify.
itayadler 8y ago
Who will sue the SEC for causing the stock to plumet due to this lawsuit? :x
- jgh 8y ago
  Come on... The fault here is with Musk and Tesla. Why should investors be allowed to sue regulating bodies because the bad behavior of their companies results in a loss for them?
- mrfredward 8y ago
  Why blame the fraudster, when you can blame the people fighting fraud?
  - onepremise 8y ago
    Have you seen what the SEC has been doing to crypto? You're telling me the chairman appointed or Trump couldn't stand to benefit from their decisions? https://www.investopedia.com/tech/bitcoin-vulnerable-sec-manipulation/ https://www.investopedia.com/tech/bitcoin-vulnerable-sec-man...
    - zone411 8y ago
      Why don't you tell us, what horrible things has he been doing to crypto? And how will the SEC chairman and Trump benefit?
jaimex2 8y ago
I'm surprised how swiftly the SEC is moving, could they really build a strong case that quickly?
- deleted 8y ago
  [deleted]
- ilikehurdles 8y ago
  Maybe the evidence is very clear and easy to get.
- rayiner 8y ago
  By now, the SEC has already investigated this throughly. They’ve interviewed relevant witnesses, reviewed relevant documents, etc. The case is straightforward (the tweet is public record, interviews would quickly reveal there was no deal in the works). So the SEC has what it needs; the case will turn on Musk’s defenses. Since the ball is in his court, there is no reason for the SEC not to move forward quickly.
- treis 8y ago
  If you make a statement on Twitter and then admit it wasn't true in a blog post you make it a pretty easy case to prove.
- jcranmer 8y ago
  Musk has explicitly admitted that the "funding secured" was actually based on conversations with the Saudi sovereign fund, which appear to have been at a stage where they were still negotiating conditions (such as building a Tesla plant in Saudi Arabia). All the SEC has to do is show that the conversations with the Saudi fund did not constitute a verbal agreement to any reasonable observer (which means, were Musk to believe that he had a verbal agreement, he was being reckless in that belief). This isn't a case where someone committed a crime and carefully tried to hide their actions; this isn't a case that hinges on misunderstandings of the law. It is a case where someone essentially said "this is a final decision" and later clarified "by final, I really meant this was in preliminary stages, but I'm confident it can be finalized quickly."
danso 8y ago
> Musk reportedly refused to sign the deal because he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the sources said. What is he even thinking here? The evidence seems pretty clear that he did not have funding or investors secured at the time of the $420 tweet — judging by the unprepared and panicked reaction of his investors and executives an hour afterwards. Is Musk claiming that he truly did have funding secured despite all external evidence to the contrary? I really hope this won’t also be his mentality for fighting the libel suit.
- ijpoijpoihpiuoh 8y ago
  He seems pretty unstable recently, and this seems like another instance of that instability. If he was acting thoughtfully, he would not be in this situation in the first place, so his behavior seems consistently irrational, at least.
  - _louisr_ 8y ago
    Unstable? Do you have any idea of the history of Elon Musk and his companies? Obviously you don't, and obviously you are talking out of your rear. You should read up about Tesla and SpaceX in 2008 if you want to learn about the conditions that might make a man unstable. Posts like these make HN readers look like vapid, patronizing high-schoolers.
    - dang 8y ago
      Personal attacks will get you banned on HN, regardless of how wrong another comment is. Please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and don't do this again.
  - Cthulhu_ 8y ago
    Oh I don't think he was unstable or anything, he did that (I believe) knowing full well what the results and potential consequences would be. Results: Stocks jump upwards, hopefully enough to hurt the short sellers and make them back off. The short sellers have / had been paying heavily to portray Tesla negatively in the news, just look at the coverage that one accident with a Tesla on autopilot through a construction zone had, or the coverage Tesla gets when there's a fire (while a thousand gas powered cars go up in flames during the media outburst). Potential consequences: SEC on his ass. I don't think it'll end well for him. If he's lucky he just gets a big fine and gets to keep helming Tesla and SpaceX. This settlement was probably the best deal for him (financially) and only a fraction of the money gained / lost on the stock market from his tweet. But it would mean he had to step down for two years - possibly the two most critical years in Tesla's history. IMO he shouldn't have published that, that was a bad call.
ckastner 8y ago
If he wouldn't have been able to live with the idea of a settlement, he's probably going to have a really hard time with the outcome of the lawsuit.
denzil_correa 8y ago
> Under the terms of the deal, Musk and Tesla would have had to pay a nominal fine, and he would not have had to admit any guilt. However, the settlement would have barred Musk as chairman for two years and would require Tesla to appoint two new independent directors, reported CNBC's David Faber, citing sources. I don't think the fine was a problem here for Musk.
- ckastner 8y ago
  Ironically, barring him for two years and appointing two new independent directors would probably be a huge win for Tesla.
  - toomuchtodo 8y ago
    I think it'd be a huge win for short term Tesla investors and Tesla, but not long term investors. Tesla's financials should be pushed as hard as possible to enable scaling rapidly (every dollar not needed in opex should be going to capex or r&d). Independent directors (in my opinion) would prioritize saving Tesla as an ongoing concern, even if it meant they remained a small boutique manufacturer (vs growing into an energy storage powerhouse). TL;DR I want Captain Ahab at the helm, chasing his White Whale, swinging for the fences. I don't want Bob Lutz or Lee Iacocca.
    - draggnar 8y ago
      By long term do you mean less than two years? He could have come back after two years of boring leadership.
    - compcoffee 8y ago
      >TL;DR I want Captain Ahab at the helm, chasing his White Whale, swinging for the fences. I want people with the integrity not to commit securities fraud.
      - toomuchtodo 8y ago
        Morality is shades of gray. Nobody died, and I have yet to see the damages done by his statements quantified. You and I want different values in leaders, and that's okay.
hef19898 8y ago
Ok, when has it ever been a good idea to piss off the SEC? They offer you a deal, let you off rather easy in exchnage for some symbolic concessions after you did something not to smart resulting in some unwanted stock movements. And then you tunr your back on that deal, and the SEC. What exactly do you expect will happen afterwards?
- mtgx 8y ago
  Mark Cuban did it and won.
  - toomuchtodo 8y ago
    Musk has hired white collar attorney and former Southern District AUSA Chris Clark of Latham & Watkins (who successfully defended Cuban against the SEC).
  - Agathos 8y ago
    Insider trading is a lot harder to prove.
brtknr 8y ago
Is this what you get to do if you’re a billionaire? Fight lawsuits?
- Cthulhu_ 8y ago
  Nah you have a legal team to do that for you.
onepremise 8y ago
idk, a part of me wished he had dirt on some of these short trading firms, Greenlight Capital, etc. Short sellers do seem to have uncanny timing for playing press releases, especially when they are false. Lots of manipulation, especially in crypto, causing enormous losses. However, rarely do I see the SEC go after these guys. I would like the SEC to go after both, not just Musk, if it does turn out he defrauded investors. I admit, I want to see Tesla succeed, but not at the expense of HODLers, owners, and tech enthusiast. Musk doesn't need to be at the helm of Tesla for it to succeed. We just need somebody in there that can stabilize the excessive spending and research, start reducing the debt incurred. If Tesla can ever shed the debt, they wont have to worry about short sellers and the TSLA share price.
- JumpCrisscross 8y ago
  > rarely do I see the SEC go after these guys What would they go after the short sellers for? Shorting incentivises bubble popping and private antifraud research. I can't think of a single time short sellers trashed a healthy company, yet I can think of several times short sellers pricked something foul before it got too far along.
EADGBE 8y ago
Almost every year, I end up owing a lot of income taxes; a calculation that I always tend to mess up in order to gain a bit of advantage with the tax laws. I usually just pay the tax bill, and move on. I'd love to be true to myself, too. But sometimes it just doesn't work. You mess up, you admit it, and no one is mad anymore. You can lose a battle, but win a war.
bsbechtel 8y ago
I'm not arguing Musk's tweet wasn't ill advised, but this seems to say a lot about how fragile our system is if 140 poorly thought out characters can cause so much damage. What about the fiduciary duty of all those investors who changed their positions based on this information? If you are putting millions of dollars at risk based on a cryptic tweet, you are failing at your job as much as Musk failed at his, and you don't deserve to be protected by the SEC.
- harryh 8y ago
  One of the SEC's core jobs is to protect investors from corporate officers who lie to them about the state of the public companies that they are running. This is precisely what Elon Musk did.
  - chaosbutters314 8y ago
    Were they around during Enron?
    - harryh 8y ago
      There was a huge investigation of Enron by the SEC. Among other things, CEO Jeffrey Skilling was barred from ever again serving as an officer of a public company. He also spent ~12 years in prison (Though that was a separate action. The SEC can't send people to prison).
- JumpCrisscross 8y ago
  > If you are putting millions of dollars at risk based on a cryptic tweet, you are failing at your job as much as Musk failed at his The SEC lets companies make corporate announcements on social media. If a company says "I was just acquired for $900 a share," I would consider that material information worth trading on. If a company says "funding secured," which has a very precise and technical meaning in corporate finance, in a corporate announcement, I would consider that to be similarly material. Our capital markets won't work if straightforward misstatements in corporate announcements are permitted.
- 8y ago
_louisr_ 8y ago
I'm glad that this article has hot takes from two random investors! One says Elon has a 25% chance of staying CEO, the other says that Tesla won't be able to raise capital with this bad news. Sweet, now I have my talking points to regurgitate to my friends & can stop thinking. Thank you CNBC and modern media.
godelmachine 8y ago
Just one question for all HNer's here. Once this trial commences, how long will it take for the final verdict to be out? Not much acquainted with the US judiciary, but the initial chargesheet by SEC says they demand a jury trial.
- rory096 8y ago
  Could take years, per the article. >Since Musk so far has chosen to fight this, it could take years to reach an outcome, said Bernstein analyst Toni Sacconaghi in a note Friday.
  - chaosbutters314 8y ago
    Maybe a dumb question, if it takes years, and in that time tesla becomes profitable enough that Elon takes it private, could he escape some of the penalties that way? Like, did he realize that since the trial will take so long that by the time it is done, he will be able to circumvent some of the harsher penalties?
    - gamblor956 8y ago
      No, the penalty is being permanently barred from being an officer or director of any public company. If he goes to trial, there isn't going to be any middle ground.
      - godelmachine 8y ago
        Sounds just.
      - Klathmon 8y ago
        But would that impact him if he were to take Tesla private before being barred (as in this hypothetical, he wouldn't be an officer or director of a public company, just of a private one)?
  - godelmachine 8y ago
_louisr_ 8y ago
You heard it here first, folks. Kick out the visionary who has started three billion-dollar companies, and bring in some neutered CEO who is fluent in corporate-speak to take over operations. Surely, this is the correct decision - These men like Elon are too unstable to run the companies that they have spent their entire lives creating! Thanks, ckastner.
- compcoffee 8y ago
  >Kick out the visionary who has started three billion-dollar companies So the fact that he may be a fraudster is irrelevant to you? By the way, he didn't start Paypal or Tesla.
  - BukhariH 8y ago
    "he didn't start Paypal" - What? Yeah, he absolutely did start PayPal which came out of merger between X.com (the company he founded) and Confinity (the company Peter and Max founded).
  - Cthulhu_ 8y ago
    > By the way, he didn't start Paypal or Tesla. Indeed, this is important to remember - he actively rewrites history to make it seem he founded Tesla, he even bought out the actual founder(s) of Tesla (Martin Eberhard and Marc Tarpenning) so they wouldn't keep bugging people about the fact he / they founded it.
- JumpCrisscross 8y ago
  > Kick out the visionary That wasn't what the SEC proposed in their no-guilt settlement. It was Elon giving up the Chairmanship and appointing two independent directors. That isn't crazy. It wasn't dethroning the king. It was adding sensible checks to a situation that screams for them. That offer was rejected. The SEC's response is to hem to the statutory punishment for public, material misstatements in a corporate announcement by senior officers.
  - _louisr_ 8y ago
gdsdfe 8y ago
Isn't by suing him they hurting the investors more?
- yAnonymous 8y ago
  Take your sound logic somewhere else, please. We are in the midst of a shitstorm here.
  - mcguire 8y ago
    Which hurts investors more, a suit against a single company or a system that allows corporate officers to lie about material facts of their companies?
  - gdsdfe 8y ago
    It was just a question not a statement not anything else
jiveturkey 8y ago
maybe he feels he can point to his pedo tweets as evidence that he’s a buffoon and people shouldn’t believe what he says?
- joshstrange 8y ago
  That strategy "worked" for the president when he called Omarosa a "Dog"
forkerenok 8y ago
I think it comes from the same thing: he doesn't want to lose (yet another one) to the shorters. And he is OCD about it.
woodandsteel 8y ago
I am a huge fan of Musk, but I hate to say that I can see the SEC's side. In corporte finance, which is what the SEC is responsible for regulating, the phrase "funding secured" has a precise meaning, and the situation Musk described did not come close to meeting it. Musk may not have been trying to manipulate the stock price when he said funding was secured, but if he was allowed to speak in such a sloppy, misleading manner, then other CEO's would start doing too too, which would have very bad consequences. So the SEC has to come down on Musk as hard as it can, and it has great powers for doing this.

98 points by justin66 8y ago

Musk continues to make very, very poor decisions, over this last year. If his decision-making for things like this are so poor, I can only imagine how poor his decisions are behind the scenes for things concerning Tesla itself. I wonder what happened. My guess is that he must be on some sort of medication due to his battle with the Model 3. The tweet in question was inexplicable and I was very tempted to short the stock when I heard, but I didn’t want to bet against Musk. Now he seems mentally so fragile and his ability to lead Tesla is seriously in doubt.

vertline3 8y ago
The "who wears short shorts" music video he linked is where I started to think the shorts were really getting to him. In his defense there was a lot of negative spin likely originating from his short sellers, who had the largest short position of any stock I think. Most companies CEOs are really careful and always act like nothing is wrong even as the ship sinks. In interviews Musk was refusing to answer certain questions from reporters accusing them of being from his short sellers, it all makes me wonder if the financials aren't so rosy.
- nostrebored 8y ago
  How is it spin? The metrics for Tesla were/are not promising and they were already being looked at by the sec for potential fraud regarding those metrics
  - vertline3 8y ago
    It becomes spin when several stories are floated in order to erode confidence in the company. Musk's accusations were that much of the negative press was coming from shorts or competitive rivals, wether that be energy companies or car companies. The truth for me lies in between.
api 8y ago
Rumor is that he's been on a stimulants / sleep aids cycle working ludicrous hours. You can only sustain that for so long before your brain throws a rod and starts banging and chugging and emitting a lot of smoke. There are tweets in support of this, like him talking about Ambien. https://www.cnet.com/news/elon-musks-strange-strange-ambien-tweet/ https://www.cnet.com/news/elon-musks-strange-strange-ambien-... Ambien is known to produce some weird states of mind. I used it briefly and can attest to this, though I never got a visit from the walrus: https://ambien.blogspot.com/2010/12/ambien-walrus-collection.html https://ambien.blogspot.com/2010/12/ambien-walrus-collection... I admire Elon a lot, and I hope he takes a break and gets his head sorted. When I first heard about the tweets causing the SEC to sue I speculated to my wife that his subconscious mind had engineered this event to force him to take a break as some kind of mental self-preservation circuit breaker.
- dahdum 8y ago
  Rosanne blamed Ambien, and I wouldn’t be surprised if more public figures do. It’s a convenient scapegoat that doesn’t injure their reputation like admitting hard drug use or alcohol abuse would. Musk couldn’t have been thinking straight when he sent that tweet, but we’ll likely never know the real story. I think that’s OK, he’s entitled to some personal privacy too.
MrEfficiency 8y ago
I keep thinking he MUST be smart right? Or did he get a winfall on Paypal and now throws a bunch of money at talented engineers? I remind myself smart engineers might not be talented leaders.
amluto 8y ago
I’m not sure medication needs to be involved. I don’t care how superhuman you might think you are, if you work 100+ hour weeks for that long, it’s going to mess with your mental state.
- andreygrehov 8y ago
  I'm pretty sure the 100+ hour workweek is a fairytale, the kind of marketing for Elon himself.
  - kamaal 8y ago
    That's like 14 hours per day. You will be surprised how many people in developing and under-developed countries put in that kind of effort without breaking a sweat. 40 hour work weeks are the luxury of developed first world countries.
    - andreygrehov 8y ago
      I'm not sure what kind of work and what countries specifically you are referring to, but my guess is that you're talking about a physical work, which is not comparable to mental work, that dominates Elon's day. It's not like he's making decisions 14 hours in a row. He's jumping between companies and various meetings. He eats. He drinks coffee. It all deducts. If you meant something else, feel free to clarify.

itayadler 8y ago

Who will sue the SEC for causing the stock to plumet due to this lawsuit? :x

jgh 8y ago
Come on... The fault here is with Musk and Tesla. Why should investors be allowed to sue regulating bodies because the bad behavior of their companies results in a loss for them?
mrfredward 8y ago
Why blame the fraudster, when you can blame the people fighting fraud?
- onepremise 8y ago
  Have you seen what the SEC has been doing to crypto? You're telling me the chairman appointed or Trump couldn't stand to benefit from their decisions? https://www.investopedia.com/tech/bitcoin-vulnerable-sec-manipulation/ https://www.investopedia.com/tech/bitcoin-vulnerable-sec-man...
  - zone411 8y ago
    Why don't you tell us, what horrible things has he been doing to crypto? And how will the SEC chairman and Trump benefit?

jaimex2 8y ago

I'm surprised how swiftly the SEC is moving, could they really build a strong case that quickly?

deleted 8y ago
[deleted]
ilikehurdles 8y ago
Maybe the evidence is very clear and easy to get.
rayiner 8y ago
By now, the SEC has already investigated this throughly. They’ve interviewed relevant witnesses, reviewed relevant documents, etc. The case is straightforward (the tweet is public record, interviews would quickly reveal there was no deal in the works). So the SEC has what it needs; the case will turn on Musk’s defenses. Since the ball is in his court, there is no reason for the SEC not to move forward quickly.
treis 8y ago
If you make a statement on Twitter and then admit it wasn't true in a blog post you make it a pretty easy case to prove.
jcranmer 8y ago
Musk has explicitly admitted that the "funding secured" was actually based on conversations with the Saudi sovereign fund, which appear to have been at a stage where they were still negotiating conditions (such as building a Tesla plant in Saudi Arabia). All the SEC has to do is show that the conversations with the Saudi fund did not constitute a verbal agreement to any reasonable observer (which means, were Musk to believe that he had a verbal agreement, he was being reckless in that belief). This isn't a case where someone committed a crime and carefully tried to hide their actions; this isn't a case that hinges on misunderstandings of the law. It is a case where someone essentially said "this is a final decision" and later clarified "by final, I really meant this was in preliminary stages, but I'm confident it can be finalized quickly."

danso 8y ago

> Musk reportedly refused to sign the deal because he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the sources said. What is he even thinking here? The evidence seems pretty clear that he did not have funding or investors secured at the time of the $420 tweet — judging by the unprepared and panicked reaction of his investors and executives an hour afterwards. Is Musk claiming that he truly did have funding secured despite all external evidence to the contrary? I really hope this won’t also be his mentality for fighting the libel suit.

ijpoijpoihpiuoh 8y ago
He seems pretty unstable recently, and this seems like another instance of that instability. If he was acting thoughtfully, he would not be in this situation in the first place, so his behavior seems consistently irrational, at least.
- _louisr_ 8y ago
  Unstable? Do you have any idea of the history of Elon Musk and his companies? Obviously you don't, and obviously you are talking out of your rear. You should read up about Tesla and SpaceX in 2008 if you want to learn about the conditions that might make a man unstable. Posts like these make HN readers look like vapid, patronizing high-schoolers.
  - dang 8y ago
    Personal attacks will get you banned on HN, regardless of how wrong another comment is. Please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and don't do this again.
- Cthulhu_ 8y ago
  Oh I don't think he was unstable or anything, he did that (I believe) knowing full well what the results and potential consequences would be. Results: Stocks jump upwards, hopefully enough to hurt the short sellers and make them back off. The short sellers have / had been paying heavily to portray Tesla negatively in the news, just look at the coverage that one accident with a Tesla on autopilot through a construction zone had, or the coverage Tesla gets when there's a fire (while a thousand gas powered cars go up in flames during the media outburst). Potential consequences: SEC on his ass. I don't think it'll end well for him. If he's lucky he just gets a big fine and gets to keep helming Tesla and SpaceX. This settlement was probably the best deal for him (financially) and only a fraction of the money gained / lost on the stock market from his tweet. But it would mean he had to step down for two years - possibly the two most critical years in Tesla's history. IMO he shouldn't have published that, that was a bad call.

ckastner 8y ago

If he wouldn't have been able to live with the idea of a settlement, he's probably going to have a really hard time with the outcome of the lawsuit.

denzil_correa 8y ago

> Under the terms of the deal, Musk and Tesla would have had to pay a nominal fine, and he would not have had to admit any guilt. However, the settlement would have barred Musk as chairman for two years and would require Tesla to appoint two new independent directors, reported CNBC's David Faber, citing sources. I don't think the fine was a problem here for Musk.

ckastner 8y ago
Ironically, barring him for two years and appointing two new independent directors would probably be a huge win for Tesla.
- toomuchtodo 8y ago
  I think it'd be a huge win for short term Tesla investors and Tesla, but not long term investors. Tesla's financials should be pushed as hard as possible to enable scaling rapidly (every dollar not needed in opex should be going to capex or r&d). Independent directors (in my opinion) would prioritize saving Tesla as an ongoing concern, even if it meant they remained a small boutique manufacturer (vs growing into an energy storage powerhouse). TL;DR I want Captain Ahab at the helm, chasing his White Whale, swinging for the fences. I don't want Bob Lutz or Lee Iacocca.
  - draggnar 8y ago
    By long term do you mean less than two years? He could have come back after two years of boring leadership.
  - compcoffee 8y ago
    >TL;DR I want Captain Ahab at the helm, chasing his White Whale, swinging for the fences. I want people with the integrity not to commit securities fraud.
    - toomuchtodo 8y ago
      Morality is shades of gray. Nobody died, and I have yet to see the damages done by his statements quantified. You and I want different values in leaders, and that's okay.

hef19898 8y ago

Ok, when has it ever been a good idea to piss off the SEC? They offer you a deal, let you off rather easy in exchnage for some symbolic concessions after you did something not to smart resulting in some unwanted stock movements. And then you tunr your back on that deal, and the SEC. What exactly do you expect will happen afterwards?

mtgx 8y ago
Mark Cuban did it and won.
- toomuchtodo 8y ago
  Musk has hired white collar attorney and former Southern District AUSA Chris Clark of Latham & Watkins (who successfully defended Cuban against the SEC).
- Agathos 8y ago
  Insider trading is a lot harder to prove.

brtknr 8y ago

Is this what you get to do if you’re a billionaire? Fight lawsuits?

Cthulhu_ 8y ago
Nah you have a legal team to do that for you.

onepremise 8y ago

idk, a part of me wished he had dirt on some of these short trading firms, Greenlight Capital, etc. Short sellers do seem to have uncanny timing for playing press releases, especially when they are false. Lots of manipulation, especially in crypto, causing enormous losses. However, rarely do I see the SEC go after these guys. I would like the SEC to go after both, not just Musk, if it does turn out he defrauded investors. I admit, I want to see Tesla succeed, but not at the expense of HODLers, owners, and tech enthusiast. Musk doesn't need to be at the helm of Tesla for it to succeed. We just need somebody in there that can stabilize the excessive spending and research, start reducing the debt incurred. If Tesla can ever shed the debt, they wont have to worry about short sellers and the TSLA share price.

JumpCrisscross 8y ago
> rarely do I see the SEC go after these guys What would they go after the short sellers for? Shorting incentivises bubble popping and private antifraud research. I can't think of a single time short sellers trashed a healthy company, yet I can think of several times short sellers pricked something foul before it got too far along.

EADGBE 8y ago

Almost every year, I end up owing a lot of income taxes; a calculation that I always tend to mess up in order to gain a bit of advantage with the tax laws. I usually just pay the tax bill, and move on. I'd love to be true to myself, too. But sometimes it just doesn't work. You mess up, you admit it, and no one is mad anymore. You can lose a battle, but win a war.

bsbechtel 8y ago

I'm not arguing Musk's tweet wasn't ill advised, but this seems to say a lot about how fragile our system is if 140 poorly thought out characters can cause so much damage. What about the fiduciary duty of all those investors who changed their positions based on this information? If you are putting millions of dollars at risk based on a cryptic tweet, you are failing at your job as much as Musk failed at his, and you don't deserve to be protected by the SEC.

harryh 8y ago
One of the SEC's core jobs is to protect investors from corporate officers who lie to them about the state of the public companies that they are running. This is precisely what Elon Musk did.
- chaosbutters314 8y ago
  Were they around during Enron?
  - harryh 8y ago
    There was a huge investigation of Enron by the SEC. Among other things, CEO Jeffrey Skilling was barred from ever again serving as an officer of a public company. He also spent ~12 years in prison (Though that was a separate action. The SEC can't send people to prison).
JumpCrisscross 8y ago
> If you are putting millions of dollars at risk based on a cryptic tweet, you are failing at your job as much as Musk failed at his The SEC lets companies make corporate announcements on social media. If a company says "I was just acquired for $900 a share," I would consider that material information worth trading on. If a company says "funding secured," which has a very precise and technical meaning in corporate finance, in a corporate announcement, I would consider that to be similarly material. Our capital markets won't work if straightforward misstatements in corporate announcements are permitted.
8y ago

_louisr_ 8y ago

I'm glad that this article has hot takes from two random investors! One says Elon has a 25% chance of staying CEO, the other says that Tesla won't be able to raise capital with this bad news. Sweet, now I have my talking points to regurgitate to my friends & can stop thinking. Thank you CNBC and modern media.

godelmachine 8y ago

Just one question for all HNer's here. Once this trial commences, how long will it take for the final verdict to be out? Not much acquainted with the US judiciary, but the initial chargesheet by SEC says they demand a jury trial.

rory096 8y ago
Could take years, per the article. >Since Musk so far has chosen to fight this, it could take years to reach an outcome, said Bernstein analyst Toni Sacconaghi in a note Friday.
- chaosbutters314 8y ago
  Maybe a dumb question, if it takes years, and in that time tesla becomes profitable enough that Elon takes it private, could he escape some of the penalties that way? Like, did he realize that since the trial will take so long that by the time it is done, he will be able to circumvent some of the harsher penalties?
  - gamblor956 8y ago
    No, the penalty is being permanently barred from being an officer or director of any public company. If he goes to trial, there isn't going to be any middle ground.
    - godelmachine 8y ago
      Sounds just.
    - Klathmon 8y ago
      But would that impact him if he were to take Tesla private before being barred (as in this hypothetical, he wouldn't be an officer or director of a public company, just of a private one)?
- godelmachine 8y ago

_louisr_ 8y ago

You heard it here first, folks. Kick out the visionary who has started three billion-dollar companies, and bring in some neutered CEO who is fluent in corporate-speak to take over operations. Surely, this is the correct decision - These men like Elon are too unstable to run the companies that they have spent their entire lives creating! Thanks, ckastner.

compcoffee 8y ago
>Kick out the visionary who has started three billion-dollar companies So the fact that he may be a fraudster is irrelevant to you? By the way, he didn't start Paypal or Tesla.
- BukhariH 8y ago
  "he didn't start Paypal" - What? Yeah, he absolutely did start PayPal which came out of merger between X.com (the company he founded) and Confinity (the company Peter and Max founded).
- Cthulhu_ 8y ago
  > By the way, he didn't start Paypal or Tesla. Indeed, this is important to remember - he actively rewrites history to make it seem he founded Tesla, he even bought out the actual founder(s) of Tesla (Martin Eberhard and Marc Tarpenning) so they wouldn't keep bugging people about the fact he / they founded it.
JumpCrisscross 8y ago
> Kick out the visionary That wasn't what the SEC proposed in their no-guilt settlement. It was Elon giving up the Chairmanship and appointing two independent directors. That isn't crazy. It wasn't dethroning the king. It was adding sensible checks to a situation that screams for them. That offer was rejected. The SEC's response is to hem to the statutory punishment for public, material misstatements in a corporate announcement by senior officers.
- _louisr_ 8y ago

gdsdfe 8y ago

Isn't by suing him they hurting the investors more?

yAnonymous 8y ago
Take your sound logic somewhere else, please. We are in the midst of a shitstorm here.
- mcguire 8y ago
  Which hurts investors more, a suit against a single company or a system that allows corporate officers to lie about material facts of their companies?
- gdsdfe 8y ago
  It was just a question not a statement not anything else

jiveturkey 8y ago

maybe he feels he can point to his pedo tweets as evidence that he’s a buffoon and people shouldn’t believe what he says?

joshstrange 8y ago
That strategy "worked" for the president when he called Omarosa a "Dog"

forkerenok 8y ago

I think it comes from the same thing: he doesn't want to lose (yet another one) to the shorters. And he is OCD about it.

woodandsteel 8y ago

I am a huge fan of Musk, but I hate to say that I can see the SEC's side. In corporte finance, which is what the SEC is responsible for regulating, the phrase "funding secured" has a precise meaning, and the situation Musk described did not come close to meeting it. Musk may not have been trying to manipulate the stock price when he said funding was secured, but if he was allowed to speak in such a sloppy, misleading manner, then other CEO's would start doing too too, which would have very bad consequences. So the SEC has to come down on Musk as hard as it can, and it has great powers for doing this.