Poor Elon Musk, he just can’t get enough attention. Apparently, Jussie Smollett has the same problem.
Good thing for one of them there’s a difference between them.
In terms of their crimes, in Smollett’s case the wrongdoing is alleged, while in Musk’s case he signed his own admission.
I’m not interested in Jussie Smollett’s big part on a waning show on the small screen or his small life off-screen and his desire to be on TMZ, which turned into national news.
But I am very interested to see if the TMZ-lite of Wall Street, the SEC, slaps Elon Musk on the wrist again for his latest crime – or does its job properly, once and for all.
You can follow the Smollett saga on TV (be careful what you wish for, Jussie).
But you’re not going to get the “inside edition” of what’s happening with Tesla Inc. (NasdaqGS:TSLA), what could happen to Musk, and how you can make money on the situation anywhere…
Except for right here at Wall Street Insights & Indictments.
Let’s dive in…
He Puts the “Twit” in Twitter
No question, Musk is a repeat offender.
After the stock market closed this Tuesday, February 19, Elon Musk the Tweeting Twit (a title worn by more than a few peeps and creeps) tweeted, “Tesla made 0 cars in 2011, but will make around 500k in 2019.”
Too bad that’s a gross misrepresentation of material facts, and patently illegal.
Securities regulations state it’s illegal for a director or officer of a public company “to knowingly or recklessly make material misstatements about that company,” according to John Coates, a professor at Harvard Law School who teaches mergers and acquisitions.
At the time of Musk’s notorious tweet back on August 7, 2018, “Am considering taking Tesla private at $420. Funding secured,” Mr. Coates said Musk’s “tweets seem cryptic at best, and it is hard to see how he has complied with his duty to not be misleadingly incomplete.”
His latest blast is not any different.
This time around, four hours after his misleading statement that Tesla would produce 500k cars in 2019, Musk tweeted, “Meant to say annualized production rate at end of 2019 probably around 500k, i.e. 10k cars/week. Deliveries for year still estimated to be about 400k.”
Then, less than 24 hours after Musk tweeted his clarification, Tesla’s new general counsel, Dave Butswinkas, the company’s top legal dog of less than two months, getting the job after the Washington lawyer represented Musk in his dust-up with the SEC over his 2018 criminal tweet, quit.
The bottom line real deal here is Butswinkas quit because he may be at risk as Tesla’s general counsel for letting Musk fire off another criminal tweet.
Of course, Dave Butswinkas can’t control Musk. Apparently, no one can.
But the brilliant attorney with a stellar reputation looks like a fool after getting Musk off with an easy wrist-slapping from the SEC, which could have barred him from ever being an executive or officer of a public company.
He steps into Tesla to make sure it doesn’t happen again – and BAM! It happens.
Unfortunately for Dave, he probably can’t go back and represent Musk when the SEC comes for him again because he might have his own career to defend.
Not that the regulators are going to, because the SEC is a soft-shoed version of TMZ, tiptoeing around the rich, famous, and powerful and not exposing them for what they are – when they deserve real punishment.
But they should.
[CRUCIAL] 3 Minutes, A Chance at 9X Your Money
And if they do, it could all be much tougher this time on Musk and on Tesla’s stock.
It’s unlikely, though anything’s possible with the SEC, that the regulator is going to take getting spat in the face lightly.
They imposed restrictions on Musk, made the company shuffle some paper and positions to get a babysitter to watch over Musk, and see to it that he doesn’t fire off materially misleading tweets ever again.
Oops. Someone screwed up.
Musk already signed his admission, the material misstatements are in the tweet, and no clarification four hours later with the general counsel quitting is going to cut it.
The board should be in trouble, too. Big trouble.
The Greatest Show on Earth
The fact is, Tesla’s in trouble.
Only, most starry-eyed “Musketeers” don’t want to see it or believe it.
But something’s smelly under the big tent at Tesla and it’s not just the ringmaster’s barking.
Some serious defections at Tesla warrant investor concern.
Here’s what’s scary:
- The company’s chief accounting officer, Eric Branderiz, quit after only 14 months on the job and was replaced by Dave Merton, the former chief financial officer at Seagate, who then quit after less than two months on the job;
- After only 15 months on the job, Jason Wheeler, the company’s chief financial officer, told Musk the day before their latest earnings announcement in January, that he quit;
- Musk had one day before having to announce on the earnings call with analysts that his new CFO was leaving to get a new CFO the Street wouldn’t freak out over;
- And the new CFO is the old CFO, Deepak Ahuja, who got a new $500k salary and $15 million in stock awards if he sticks around for four years.
- The company’s juggling accounting staff and chief financial officers because they’re quitting – and that speaks to what’s going on behind the financial curtains at Tesla;
- Tesla has a $920 million bond coming due next month;
- All the federal tax credits Tesla buyers relied on are coming to an end this summer, with the latest cut coming in January when the credit was cut in half to $3,750;
- Since the latest tax credit cut sales have fallen off a cliff, by one estimate from InsideEVs down 75% in January from the last month in 2018 when the credit was $7,500;
- Tesla’s had two price cuts on vehicles in the last six months;
- Tesla’s been laying off thousands of workers;
- And now, Elon Musk just blew his settlement deal with the SEC barring him from twit tweeting.
That’s a lot, and it’s scary.
All that adds up to timing being about right to short Tesla.
Or, you could buy some puts on the stock. They’re not cheap, but they could return a small fortune – which would be worth being temporarily scared by the cult caricature of the Greatest Show on Earth.
Tesla’s a prime example of the types of companies I target on the regular in my Zenith Trading Circle research service.
Because, let’s face it – there are a lot more crappy companies around than there are good ones.
Last year alone, readers had the chance to grab five triple-digit and eight double-digit winners on loser stocks – and I regularly drop recommendations that have the same potential as those winners, which you can learn about by clicking here.
A company doesn’t necessarily have to be hurdling toward bankruptcy for you to make a quick buck off it.
Sometimes it just has to be scary.