Musk, Tesla win securities fraud battle over that 'funding secured' tweet Elon Musk and Tesla have been found not liable by a jury in a securities fraud trial in which the billionaire and his automaker were accused of misleading investors. The verdict came on late Friday afternoon at a federal court in San Francisco. It was claimed Musk and Tesla cheated shareholders by tweeting in August 2018 about …
Of course one interpretation is that the jury have decided that Musk is actually a complete fruitcase, and whatever he says, physically or via any sort of social media, really should be treated on the same grounds as someone who claims ‘I am Napoleon’, ‘yes of course you are, now come along and take your medicine’!
The thing is that actions can be crimes without hurting anyone, but civil lawsuits (almost always) _require_ that someone is hurt in some way.
If Musk's tweet was an attempt to manipulate the market, it's a breach of SEC rules.
But to sue Musk over it, you need to have actually lost money as a result - and it looks like this batch of investors couldn't prove that they were hurt by it.
I suspect there probably are investors who lost out as a result of the tweet, but they don't appear to have been the ones willing to put their names on the lawsuit.
I think they were foolish enough to buy shares based on this tweet, in the expectation that the price would go up, and then it fell because the tweet was a load of old bollocks.
A bit like someone being silly enough to buy "penny stocks" on the recommendation of one of those stock scam spam emails, but without actually being encouraged to do so.
"Who's more foolish, the fool or the fool who follows him?"
Yes it's true, TSLA was about $23 on Aug 2018 before plummeting to $16-ish a couple times in Sept and Oct, then rebounding back to $23 levels in Nov 2018.
So investors did suffer a rapid loss of about 1/3 their share value immediately after the infamous tweet before it recovered a few months later, really it would be impossible to say precisely what caused that.
After then it skidded to about $12 by June 2019, then bounced along until it finally recovered back to $23 in Dec 2019 before it left those early valuations behind for good (more or less).
(I actually don't understand the "$420" bit, the share price then was literally $23 a share. What part was $420? I don't get it, it could only have been a stupid joke.)
The value of your investment may go down as well as up. Your house is at risk if you do not continue to make mortgage payments. Consult your doctor or pharmacist for information regarding side effects...
Am I misunderstanding completely? These professional gamblers investors believed Musk's tweet, and instead of holding their shares for the four hundred buck payout, they sold because the price suddenly dropped? And now they want compensation for *their* decisions? Imagine my sympathy!
A generous value for a share is about ten times the annual dividends. So far Tesla has paid a total of $0/share in dividends. It can be sensible to speculate on what dividends might be paid in future. Based on how many cars and power installations Tesla could possible sell and at what margin, Tesla shares were (and still are) massively over valued. The obvious response to the situation is to sell shares you do not have (short selling) in the belief that the price will fall to a more reasonable value before you have to buy and transfer to the original purchaser. Tesla was seriously shorted before the tweet - to the point where Tesla would have got a poor deal issuing new shares to fund expansion. The tweet caused some investors to buy, raise the share price and hurt short sellers. Tesla issued new shares at the high price to fund growth, which combined with the evidence that funding to go private was fiction caused the price to fall again, hurting the recent investors.
CEOs of publicly traded are not supposed to tell blatant lies about their companies to make a quick billion bucks. That behaviour is reserved for private companies - which are less accessible to amateur investors (and SPACs which by-pass the protections intended for amateurs). Musk got a surprisingly mild scolding from the SEC as it is supposed to be the job to ensure amateurs can have some confidence in publicly traded companies and that your pension fund is not completely trashed by fraud.
On 2020-08-31 the stock split 5 for 1 and 2022-08-25 it split again 3 for 1. Back then, the share price would have been say $345 and if you kept one of those old shares it would have split into 15 modern shares by now. If you look up the price of what one modern share would have been worth back then you get the $23 you see in the article. At the time, $420 was a very believable figure for what would be needed to take Tesla private.
I remember very clearly when the Tweet was reported. Back then Musk had a good reputation, damaged only by his recent treatment of Vernon Unsworth. There was talk about Tesla's purchase of SolarCity in 2016 being fraudulent but Musk was found not guilty. For the first few days I was expecting for Musk to reveal how the funding was secured. After about a week I was wondering why the fuck he had not shown any evidence that funding had been discussed with anyone. Weeks passed and still no work from Musk about where this fictitious funding was coming from. Musk got fined by the SEC and I hoped it was over but he started trash talking the SEC. The reason he has investors at all is because the SEC place some limits on the lies CEOs are allow to tell investors. Musk's "short-seller enrichment commission" tweets convinced me that he intended to lie again and needed the next lie to be believed to maintain the ridiculously high share price.
From the start there was speculation the Saudis were the source of the funding. Musk only started to mention them in public after the judge had ruled "funding secured" was a lie - well after the Saudis had invested $1B in Twitter. The covidiocy did not start until early 2020, at which point I thought my expectation of Musk had hit rock bottom but he proved me wrong in April 2022 with the "woke mind virus".
This latest ruling combined with the current share price has convinced me that Tesla has the same stability as bitcoin.
That is about the best comment on the matter that I have read.
I was in the market for an EV about the time of the "funding secured" text. I passed on a Tesla and nothing that he or the company has done since has convinced me otherwise.
Not selling spares to owners is also another big red flag.
People talk about the 'Apple Walled Garden'... El-Fruity has nothing on the mile high walls the Musk has put up around Tesla.
Where on earth does this "not selling spares" nonsense come from? You can look up the full parts list online at service.tesla.com, for free, and walk into any Tesla service centre or any one of a bunch of third party resellers and order pretty much anything on the list. I do so regularly.
GJC
Probably a good part of the reason why they won the lawsuit is that, accounting for stock splits, the stock is now six times higher than the promised number of $420... It's harder to sue for damage when you probably made a shit ton of money. This is known as "Sini Plenis Piscis"
"I actually don't understand the "$420" bit, the share price then was literally $23 a share. What part was $420? I don't get it, it could only have been a stupid joke."
Indeed. When your average Joe Bloggs tweets something it can rightly be ignored, but when someone with that many deluded followers does it there should be liability.
This judgement (if not taken further) opens the floodgates for any CEO pumping the market.
Not good.
They've come to this conclusion, despite the Judge instructing them that the post was a lie...
This is doing the reputation of the USA no good whatsoever. As of now, it's an even less safe place to do business. If market regulation isn't working, that requires legislation. I can see how US legislators might have lulled themselves into a false sense of security, that the ways and means of the "world's biggest economy" must surely be "perfect", but this is yet another piece of grit in the machinery that is building up to a lot of wear and tear... Market abuse is now something you can seemingly get away with, in the USA, more so if done in a very public way.
For Musk himself - well, I'd not be surprised if his excesses become even more extravagant, and his eventual fall subsequently more spectacular. His behaviour over the Twitter acquisition and since is a warning to everyone else considering doing business with him.
If he does get indicted he can just run for the office of Attorney General. He will really need to step up the conspiracy theory tweets to win that race.
Two hours to reach a verdict means they went over the judge's instructions, appointed a foreman and held an initial vote, which was unanimous in saying "These charges are sh*t".
I suspect he settled with the SEC because fighting would have been far too distracting and would likely have lost regardless of the merits (the SEC has its own courts and tame judges after all, and can change the rules retroactively if it wants to).
...not to mention that if the courts had awarded the $15 billion that the plaintiffs were asking for the result would have been catastrophic for business because suddenly every investor will expect to be compensated for every dip in stock price, regardless of the cause.
The fault is with people (and their bots) who just surge around markets looking for a quick killing, blindly following every rumor and generally causing instability. If they lost a bundle because they couldn't evaluate a one line message properly then its their (financial) funeral. They're a menace to both financial markets and to society as a whole. (...and Musk is right in regretting ever going near capital markets -- the predatory, destructive and incapable of seeing beyond a quarter or two.)
Retail traders have become dominant in the last few years thanks to almost guaranteed stock returns making even the most ignorant gamblers look like Warren Buffet (take a look, if you dare, at the YouTube channels offering financial advice).
However, it should be noted that Tesla has hugely benefitted from the clueless hoards putting their pandemic support cheques into stocks, and Musk clearly knows that this is a group of people he can manipulate to support his business. The purchase of Twitter could be seen as a manifestation of that - who needs a PR department when millions of people hang on your every Tweet?
"The fault is with the people" is nonsense of course. We imprison frauds because they take money from people who aren't well enough informed to identify the fraud taking place. It is not their fault for having imperfect knowledge (though yes, there are some truly stupid and gullible people out there), but those who take advantage should be stopped if possible and punished where necessary.
Retail traders just might have more knowledge and insight than the “Experts” in this case. Tesla may just put all of the legacy auto makers out of business this decade, while pioneering battery technology and storage, AI, and oh yeah,there’s Spacex. Tesla stock is still a bargain, perhaps.
"Nec audiendi qui solent dicere, Vox populi, vox Dei, quum tumultuositas vulgi semper insaniae proxima sit."
I ascribe more to the original quote by Alcuin in a letter to Charlemagne: "And those people should not be listened to who keep saying the voice of the people is the voice of God, since the riotousness of the crowd is always very close to madness."
There is no wisdom in the crowds, only madness. There may be wisdom to be found within individuals that make up the crowd but en-masse people are stupid. (or as a certain movie character put it: "A person is smart. People are dumb, panicky dangerous animals and you know it.")
The only caution I have about what you have said is that those individuals that think that they personally are the smart one over and against the crowd have very reliably been proven very, very, deeply wrong. And those who insist that they are the smart one, if not checked, have very reliably proven to be very, very, dangerous.
"The market can stay irrational longer than you can remain solvent"--about they only quote from that guy I agree with.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
