US regulator alleges Elon Musk Tesla fraud

[GeorgeOfTheJungle]

https://www.bbc.com/news/business-45672813

The Securities and Exchange Commission has filed a lawsuit accusing Tesla boss Elon Musk of securities fraud.
[...]
The lawsuit was filed in federal court in Manhattan.

[floobydust]

Of course the SEC is pissed off and suing. Musk spoke of delisting TSLA and going private to get all the asshole investors off his back.

[maginnovision]

Yea, if he is forced out it'll probably be the best thing that could happen to tesla the company, but not great for the longs(investors). Price dropped to $270.85 after hours. I have a strong feeling it'll be back up in the morning to 280-290 thanks to the fans. Trading volume was strangely low for this sort of news. They already volunteer to work for free, why not throw money at them too. Whatever happens he will probably think twice about making shit up and tweeting it to the public next time.

[donotdespisethesnake]

US regulator reaches deal with Musk, he will step down as Chairman for 3 years but remain as CEO, pay a $20 million fine. Basically a slap on the wrist, which seems proportionate to the "crime". What sort of moron bases important decisions on a tweet?

[BrianHG]

What sort of moron bases important decisions on a tweet?

He caught a bit of the 'Trump' syndrome, combined with his stress with new bad habits taking their toll.

https://www.businessinsider.com/elon-musk-ambien-use-tesla-board-what-drug-does-2018-8
https://www.marketwatch.com/story/elon-musk-smoked-weed-on-air-yet-drug-testing-for-ceos-is-exceedingly-rare-2018-09-07

These are not the only 2.....  You see why he want an underground hyperloop with stops connected to a tunnel through the garage of every house on the block...

[Mr. Scram]

He caught a bit of the 'Trump' syndrome, or it's his stress with new bad habits taking their toll.

It seems more like his investors did. The degree to which everything including Musks breakfast choices are explained in terms of business strategy is ridiculous.

[nctnico]

US regulator reaches deal with Musk, he will step down as Chairman for 3 years but remain as CEO, pay a $20 million fine. Basically a slap on the wrist, which seems proportionate to the "crime". What sort of moron bases important decisions on a tweet?

Perhaps this is a strategy to show the jury that what Musk did wasn't a big deal. Twitter isn't an official press release channel (even though Trump would use it to declare war on NK).

[EEVblog]

$20M and step down as chairman but remain as CEO.
Slap on the wrist basically.
https://www.marketwatch.com/story/sec-settlement-forces-tesla-to-find-elon-musk-some-adult-supervision-2018-09-29?mod=mw_share_twitter

[MT]

What sort of moron bases important decisions on a tweet?

The entire stock market.

[drussell]

The settlement is $20M from Musk and $20M from Tesla plus Musk stepping down as president for at least 3 years.

That is, indeed, a slap on the wrist for Musk compared to being barred for life from being an officer or director of any public company like would often be the case with this type of manipulation.

He must have some pretty good lawyers. 

[Bud]

A major radio program in Canada sarcastically called him "full time visionary"

[Jeroen3]

Yea, if he is forced out it'll probably be the best thing that could happen to tesla the company, but not great for the longs(investors).

Tesla, as a company, isn't doing very well. If you send Elon away and leave it to the shareholders, Tesla will be split and sold to other automotive players in order to make quick profit.
Except, Tesla shareholders are not ordinary shareholders.

Tesla is like Apple in 2007 setting the bar for future products. Except Tesla can't afford to use Apple's pricing game.

[drussell]

Tesla, as a company, isn't doing very well. If you send Elon away and leave it to the shareholders, Tesla will be split and sold to other automotive players in order to make quick profit.

That is the whole reason for all the pressure on Musk and Tesla to deliver Model 3s and become profitable, etc.  They are a TINY player in the auto market and will just be gobbled up by someone else if they can't show profitability and a robust path to huge future growth.

The "traditional" car makers are poised to eat their lunch very soon, despite Tesla's head start and technical prowess in certain areas.  As far as actually building cars, Tesla is pretty bad at it.  Have you seen the terrible fit and finish, even on recent builds?  The failures of parts and entire systems that they fix under warranty and often even afterwards as "good will".  That can't continue. 

They can no longer "give away" (even with a one-time fee) things like "free" SuperCharging, it is simply too expensive.  Musk's dream of having a slew of solar-powered SuperCharger stations dotting the landscape to provide limitless energy to every Tesla driver was simply pie-in-the-sky delusions which are now becoming nightmares.  Many of the old "perks" for early Tesla adopters are going away and they simply cannot continue to operate like they have. 

Tesla needs to start building reliable cars that don't constantly require warranty repairs, with  far higher margins, and build a whole lot of them very quickly or they're going to be rapidly overtaken by all the other manufacturers in the electric market.

[Marco]

He caught a bit of the 'Trump' syndrome, combined with his stress with new bad habits taking their toll.
...
https://www.marketwatch.com/story/elon-musk-smoked-weed-on-air-yet-drug-testing-for-ceos-is-exceedingly-rare-2018-09-07

He took one drag and said it wasn't for him ... the rest is just spin. So Trump syndrome indeed.

PS. the stock will most definitely go up again, all the naked shorts need to cover their position after all.

[Cyberdragon]

What sort of moron bases important decisions on a tweet?

He caught a bit of the 'Trump' syndrome, combined with his stress with new bad habits taking their toll.

https://www.businessinsider.com/elon-musk-ambien-use-tesla-board-what-drug-does-2018-8
https://www.marketwatch.com/story/elon-musk-smoked-weed-on-air-yet-drug-testing-for-ceos-is-exceedingly-rare-2018-09-07

These are not the only 2.....  You see why he want an underground hyperloop with stops connected to a tunnel through the garage of every house on the block...

on LSD:

"We should all live in yellow submarines...with rainbows!"

[Rick Law]

What sort of moron bases important decisions on a tweet?

The entire stock market.

Back in April 2018; the Securities and Exchange Commission (SEC) issued a ruling that social media such as Facebook, Tweeter, (etc...), can be used for official communication to stock holders in lieu of traditional method of using News Releases -- as long as companies gave investors a heads-up they are doing that.^[1]

Since Elon Musk used Tweeter as official channel of communication to investors, that Tweet in question became an official statement to investors. MT link is right - the entire stock market would have made decisions based on this tweet.  Musk should open another Tweeter account and separate his official tweets from personal tweets.

SEC was going to just settle^[2] and Tesla would have avoided a federal law suit, but Musk turned thumbs down on it.  That was unnecessary drama with negative stock impact.  Either way, even with an SEC settlement, Musk's legal trouble with that particular tweet may not over yet!  Absent in the news is about Department of Justice (DOJ).  SEC's law suit was merely a civil case. DOJ is/was looking him over for criminal violations^[3] and that investigation may still need to run its course ...

Apparently, neither the Tesla Board of Directors or Elon Musk learned from his 2018 April Fool "Tesla bankrupt" tweet fiasco that resulted in a 5% stock drop...  For the trouble Musk has brought to the company to be worthwhile, he better be as much a management genius as he is a visionary.



[1] SEC Embraces Social Media, Wall Street Journal
https://www.wsj.com/articles/SB10001424127887323611604578398862292997352

[2] Elon Musk reportedly almost avoided a federal lawsuit — but then backed out, VOX magazine
https://www.vox.com/business-and-finance/2018/9/29/17917544/tesla-elon-musk-securities-fraud-tweet

[3] Tesla Is Facing U.S. Criminal Probe Over Elon Musk Statements, Bloomberg News
https://www.bloomberg.com/news/articles/2018-09-18/tesla-is-said-to-face-u-s-criminal-probe-over-musk-statements

[rsjsouza]

What sort of moron bases important decisions on a tweet?

He caught a bit of the 'Trump' syndrome, combined with his stress with new bad habits taking their toll.

I agree... He should learn a thing or two from Trump, Roseanne and others that use the stupid Twitter in reckless ways...

I was surprised that Joe Rogan's podcast touched on this issue very lightly.

[donotdespisethesnake]

Apparently, neither the Tesla Board of Directors or Elon Musk learned from his 2018 April Fool "Tesla bankrupt" tweet fiasco that resulted in a 5% stock drop...  For the trouble Musk has brought to the company to be worthwhile, he better be as much a management genius as he is a visionary.

"Fool me once..."

Yes, Musk tweeted "Tesla is bankrupt" on an official channel (as well as smoking weed in public and many other things) and morons in the stock market still base trade decisions on Musks tweets. Mush is the same guy he was a year ago and will be next year, if you think that is a problem you would never invest in Tesla in the first place.

The problem is really not Musk, it's shorts trying to make money out of a company going bust.

[Rick Law]

Apparently, neither the Tesla Board of Directors or Elon Musk learned from his 2018 April Fool "Tesla bankrupt" tweet fiasco that resulted in a 5% stock drop...  For the trouble Musk has brought to the company to be worthwhile, he better be as much a management genius as he is a visionary.

"Fool me once..."

Yes, Musk tweeted "Tesla is bankrupt" on an official channel (as well as smoking weed in public and many other things) and morons in the stock market still base trade decisions on Musks tweets. Mush is the same guy he was a year ago and will be next year, if you think that is a problem you would never invest in Tesla in the first place.

The problem is really not Musk, it's shorts trying to make money out of a company going bust.

I am not sure I understand your logic.  When law is broken with disregard, why would it not be the law breaker's fault?  It is like saying cars get stolen from malls, so it is your fault driving there and got your car stolen.

People invest in stocks to make money.  That's the whole idea.  If making money off the stock market's volatility is stopped, you are left with just stock dividends.  That is not enough to drive people to invest.  Under such scenario, you will never have an IPO because you would not have venture capital around.

Even when you take venture capitalist's interest out, in the hay days of Silicon valley, you have tons of people making next to nothing but paid mainly in private (pre-IPO) stock options or grants.  Those employees were taking a gamble that if IPO'ed or acquired, those stock would worth a mint.  A year or two of minimal pay, with hope for 6 or 7 figure payback, or in rare cases even 9 or 10 figure payback.  Almost everyone probably knows someone who has done that - personally or reading about them in the press.  The first crop of such people are still in the press on occasions, Bill Gates, Steve*2 (now minus one, RIP) at Apple, etc., etc.

[Mr. Scram]

I am not sure I understand your logic.  When law is broken with disregard, why would it not be the law breaker's fault?  It is like saying cars get stolen from malls, so it is your fault driving there and got your car stolen.

People invest in stocks to make money.  That's the whole idea.  If making money off the stock market's volatility is stopped, you are left with just stock dividends.  That is not enough to drive people to invest.  Under such scenario, you will never have an IPO because you would not have venture capital around.

Even when you take venture capitalist's interest out, in the hay days of Silicon valley, you have tons of people making next to nothing but paid mainly in private (pre-IPO) stock options or grants.  Those employees were taking a gamble that if IPO'ed or acquired, those stock would worth a mint.  A year or two of minimal pay, with hope for 6 or 7 figure payback, or in rare cases even 9 or 10 figure payback.  Almost everyone probably knows someone who has done that - personally or reading about them in the press.  The first crop of such people are still in the press on occasions, Bill Gates, Steve*2 (now minus one, RIP) at Apple, etc., etc.

Going short should be illegal for various reasons, and actually partially is.

[Rick Law]

I am not sure I understand your logic.  When law is broken with disregard, why would it not be the law breaker's fault?  It is like saying cars get stolen from malls, so it is your fault driving there and got your car stolen.

People invest in stocks to make money.  That's the whole idea.  If making money off the stock market's volatility is stopped, you are left with just stock dividends.  That is not enough to drive people to invest.  Under such scenario, you will never have an IPO because you would not have venture capital around.

Even when you take venture capitalist's interest out, in the hay days of Silicon valley, you have tons of people making next to nothing but paid mainly in private (pre-IPO) stock options or grants.  Those employees were taking a gamble that if IPO'ed or acquired, those stock would worth a mint.  A year or two of minimal pay, with hope for 6 or 7 figure payback, or in rare cases even 9 or 10 figure payback.  Almost everyone probably knows someone who has done that - personally or reading about them in the press.  The first crop of such people are still in the press on occasions, Bill Gates, Steve*2 (now minus one, RIP) at Apple, etc., etc.

Going short should be illegal for various reasons, and actually partially is.

The stock market is governed by many rules.  When shorting, it is akin to borrowing or having your customer agree to delayed delivery, so it is governed as such.  It is not an indicator that there is something particularly sinister about shorting.  Even Home Depot (and the likes) are governed by certain rules when they promised delivery in 2 weeks but failed to deliver until months later.

Don't forget, when you gain money from stocks' market value, someone is giving it to you.  The one shorting is betting that stock will go down, but the one selling the short to you is betting the stock will go up.  So it is not as if it only creates a downward pressure.  It is exactly pressure neutral - you can't buy if no one want to sell and you can't sell if no one want to buy.

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EDIT - there is a wording problem with my line above: "but the one selling the short to you is betting the stock will go up".
Since replies have been made, I am not reedit the text - but I do want to point out a clarification here:

Shorting is also called selling short.

My wording "selling the short to you" is easily misunderstood or misread as "selling short to you".

So the line "but the one selling the short to you is betting the stock will go up"
would be more correct if re-written as:
"whoever you are transacting with when you are shorting, he is betting the stock will go up".

With replies already made, I wont touch the original text.   I will just hope that this clarification is clear enough to avoid future confusion...

[Mr. Scram]

The stock market is governed by many rules.  When shorting, it is akin to borrowing or having your customer agree to delayed delivery, so it is governed as such.  It is not an indicator that there is something particularly sinister about shorting.  Even Home Depot (and the likes) are governed by certain rules when they promised delivery in 2 weeks but failed to deliver until months later.

Don't forget, when you gain money from stocks' market value, someone is giving it to you.  The one shorting is betting that stock will go down, but the one selling the short to you is betting the stock will go up.  So it is not as if it only creates a downward pressure.  It is exactly pressure neutral - you can't buy if no one want to sell and you can't sell if no one want to buy.

The problem is that people start exerting pressure to make sure reality lines up with their expectations and that's where things go awry. Even just rumours can make a massive difference. It's obvious that something like that is bound to happen when you allow shorting.

[Rick Law]

The stock market is governed by many rules.  When shorting, it is akin to borrowing or having your customer agree to delayed delivery, so it is governed as such.  It is not an indicator that there is something particularly sinister about shorting.  Even Home Depot (and the likes) are governed by certain rules when they promised delivery in 2 weeks but failed to deliver until months later.

Don't forget, when you gain money from stocks' market value, someone is giving it to you.  The one shorting is betting that stock will go down, but the one selling the short to you is betting the stock will go up.  So it is not as if it only creates a downward pressure.  It is exactly pressure neutral - you can't buy if no one want to sell and you can't sell if no one want to buy.

The problem is that people start exerting pressure to make sure reality lines up with their expectations and that's where things go awry. Even just rumours can make a massive difference. It's obvious that something like that is bound to happen when you allow shorting.

Don't forget, shorting is equivalent to just another buy and/or sell transaction with agreed time delay.  That it is a composite transaction means certain paperwork/money-transfer can be totally taken out or done differently.

Rumors can always occur even if shorting is totally verboten, and, stock manipulation is already illegal.

I suppose when you are "contractually obligated to buy/sell", it would create a "desire to cheat".  That I agree.  But don't forget, "plan to buy/sell" can create such desire too - if John Doe wants to invest his entire year-end bonus in Tesla stock, he would have a desire for Tesla stock to take a dip right around year end.  So "contractually obligated to buy/sell" is not alone in creating a "desire to cheat".

[nctnico]

Don't forget, when you gain money from stocks' market value, someone is giving it to you.  The one shorting is betting that stock will go down, but the one selling the short to you is betting the stock will go up.

I used to work at a stock broker and shorting has been explained differently to me: when shorting you sell shares you borrow (rent) from someone else. Going short is basically selling something you don't have at all. At the end of the short you have to buy the shares at market price and the profit/loss is made at that point.

[Rick Law]

Don't forget, when you gain money from stocks' market value, someone is giving it to you.  The one shorting is betting that stock will go down, but the one selling the short to you is betting the stock will go up.

I used to work at a stock broker and shorting has been explained differently to me: when shorting you sell shares you borrow (rent) from someone else. Going short is basically selling something you don't have at all. At the end of the short you have to buy the shares at market price and the profit/loss is made at that point.

You and I are in total agreement on what shorting is - you said it with all the steps of the composite transaction without simplification.

I worded it in a very confusing way with the terms "shorting" and "shell the short to you".  That was entirely my wording problem.

If you are the one shorting and I am your transaction partner, I am selling you the opportunity to borrowing from me - ie: selling a loan to you. I worded it as "I am selling the short to you", that is confusing and that's my fault.

For a discussion of the merit of shorting however, it actually is irrelevant who is the seller and who is the buyer. 

But - the buy/sell is entirely unnecessary (mathematically speaking).

There is no need for me to borrow->sell->delay->buy->return at all.  When simplified, it is merely a transaction of "cash equal to stock value" in a simple borrow->delay->return transaction.

So, the transaction distills to: I borrow from you cash equal to the value of 20 shares of Tesla stock, and I promise to repay you the cash equal to the value of 20 shares of Tesla in 3 days.

I am betting the stock will drop, I am re-paying you $ equal to 20 shares, and it will be less due to the drop.
You are betting the stock increased, In 3 days, the stock will worth more, so I will be paying you back more.