The Securities and Exchange Commission (SEC) folded its tent so quickly when facing Elon Musk’s personality cult last week, they might as well pack up their flea circus altogether and leave town.
Elon Musk – the founder, chairman, CEO and 20% stock owner of Tesla Inc. (NasdaqGS:TSLA) – blatantly violated some of the SEC’s most important rules: he did not properly govern the disclosure of material information, and grossly attempted to manipulate the company’s stock for corporate and personal gains.
And what did Elon the pied-piper get? A wink and a nod to keep on keeping on.
Frankly, it’s disgusting. The SEC’s a joke, and Mr. Musk should be barred from running a public company.
What happened is proof that the worthless regulatory body that lost all the country’s investment banks in the financial crisis is doing another bang-up job of doing nothing to secure the integrity of U.S. exchanges, the corporations, or the officers and directors of those companies they regulate that trade on those exchanges.
It’s Textbook Manipulation
The UNITED STATES SECURITIES AND EXCHANGE COMMISSION Plaintiff, vs. ELON MUSK, Defendant in Civil Action No. 1:18-cv-8865 Jury Trial Demanded, filed in the United States District Court Southern District of New York, was nothing short of a bombshell.
As far as complaints go, it was a surefire bullseye.
The Claim For Relief states: “Defendant, with scienter, in connection with the purchase or sale of securities as set forth above, directly or indirectly made untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading by the use of the means or instrumentalities of interstate commerce, and of the mails, and the facilities of a national securities exchange.”
Proof of the violations is so cleanly, neatly, simply, and substantially documented in the Complaint it would be almost impossible for Elon Musk to win even a jury trial, where his “poor-poor pitiful me, I’m overworked and under-loved for trying to save the world” mantra would be his only defense.
Read the Complaint; it’s short and as entertaining as it is damning. The SEC uses Mr. Musk’s own tweets, his own words, to hang him.
And, just when they have him dead in their sights, they blink and let him off with a wink.
The short version of Musk’s attempt to manipulate higher the stock that’s already made him a billionaire several times over is: he did it to squeeze short sellers who’ve been ranking on him and, he says, undermining his company and its employees.
But, there’s more to the story that the SEC doesn’t include in their Complaint.
Musk’s infamous tweet of August 7, 2018 was, “Am considering taking Tesla private at $420. Funding secure” was followed up over the next three hours with additionally false and misleading tweets, including:
- “My hope is *all* current investors remain with Tesla even if we’re private. Would create special purpose fund enabling anyone to stay with Tesla.”
- “Shareholders could either [sic] sell at 420 or hold shares & go private.”
- “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”
According to the Complaint, “Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions. When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a ‘special purpose fund,’ and had not confirmed support of Tesla’s investors for a potential going private transaction. He also knew that he had not satisfied numerous additional contingencies, the resolution of which was highly uncertain, when he unequivocally declared, ‘Only reason why this is not certain is that it’s contingent on a shareholder vote.’ Musk’s public statements and omissions created the misleading impression that taking Tesla private was subject only to Musk choosing to do so and a shareholder vote.”
One of the most damning reasons for Musk’s manipulation that didn’t make it into the Complaint is the fact that Musk knows the company has a $920 million convertible note due in March, which it wouldn’t have to pay off if the stock was above $359, the conversion price.
Above $359, it would be more advantageous for note investors to not get their $920 million back, but convert their note to equity at Musk’s $420 price and earn a windfall.
Which would mean Tesla wouldn’t have to raise almost a billion dollars to pay the noteholders off.
If that’s not blatant manipulation, to say nothing of trying to squeeze hated short sellers and enriching himself hugely, then there’s no such thing as manipulation.
Elon Musk: 1. SEC: ZERO.
What’s really crazy in this story, not even that “Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price.'” but that the SEC, armed with all the damning facts it had, decided to offer Musk a settlement.
Musk agreed. Then, he had his lawyers withdraw his agreement to settle and announced to the world he was going to fight the charges – because, you know, Elon Musk is a crybaby fighter after all.
All this happened last Thursday. Then, on Friday, Musk had his lawyers go back to accept the settlement.
That got the SEC really mad. Well, as mad as a toothless dog can get.
Instead of a two-year ban from being chairman of the board, they made it three years. And, they tacked on more fluff money to the fines they levied on Musk and the company, to $20 million each.
Oh, the pain of it all.
I’d be laughing if I was Elon Musk, but I’m not. I’m sick that the SEC folded over like a paper pussycat.
By the letter of the law, and I know the “allegations” weren’t proven in a court of law, Elon Musk is guilty. Period.
So, why did the SEC roll over like the toothless rover it is?
Because they didn’t want the Musk Cult blaming them for knocking down Tesla’s stock by knocking down their manipulative, egomaniacal, world-saving, pot-smoking (not that there’s anything wrong with that, unless you do it live in an interview and you’re a director and officer of a publicly traded company) leader. And for making Elon cry.
If the SEC’s blatant winking and nodding to Elon Musk’s deplorable, manipulative acts is any indication of how they’ll treat any big-name, bigshot CEO, we’re in trouble. They gave him nothing more than a slap on the wrist.
It doesn’t matter how much of a genius Mr. Musk is or how techy and futuristic Tesla is; it’s not worth putting your hard-earned cash into a pool of corruption. And you know it will get worse from there.
I’ve washed my hands of the stock market; if you think any of the biggest companies on the stock market aren’t governed by people just like Elon, who the SEC will blink and then wink at, then good luck with that.
I can’t justify putting money into the stock market anymore. Stocks are trash.
I’ve found a better method of making money off the stock market – a way that doesn’t deal with any of these bozos in the SEC or crappy CEOs.
With just a push of a button on your computer every week, you can rake thousands of dollars into your bank account by every Friday. And no matter which way the market goes (or which CEO takes to Twitter next), you can get your chance to be on top.
Oh, yeah, and my method has eight years of back-testing behind it – and a shiny 93% accuracy rating.
And, note to self, SEC. You’re a joke.
Elon Musk: 1. SEC: ZERO.