Short Sellers Sue Musk

[Just a Reader]

Funding secured means he has funders who back his bid for going private. A ballpark measure of their capital is enough for Elon to claim funding secured. .....

Funding secured

“That’s a clear factual statement,” said John C. Coffee Jr., a professor at Columbia Law School who specializes in corporate law and securities fraud. “If it’s not fully secure, that’s potentially a very material misrepresentation, and a very straightforward violation of Rule 10b-5” of the securities law — in short, securities fraud.

Did Elon Musk Violate Securities Laws With Tweet About Taking Tesla Private?

Well, I suppose that you are the greater authority in this field of law.

 

[Mario Kadastik]

Well its up to the shorts to PROVE that it isn't secured. How they are going to do it beats me It's their own problem that they didn't listen to Elon when he gave multiple warnings that it's not wise to be short Tesla (he already knew that a buyout plan was brewing in the back of his mind).

 

[GeorgeSymonds]

Well its up to the shorts to PROVE that it isn't secured. How they are going to do it beats me It's their own problem that they didn't listen to Elon when he gave multiple warnings that it's not wise to be short Tesla (he already knew that a buyout plan was brewing in the back of his mind).

Its also wise for Tesla to submit a 8-K form to the SEC explaining the announcement within 4 working days of the tweet

If musk really wanted to hurt the shorts he'd have given NO warnings

 

[CatB]

Sheesh, anyone want to file a counter suit over the time Elon tweeted that he thought the stock was overvalued?
What material evidence did he have for that? And why didn’t he share?
Seems that made the shorts some money ... at the expense of us longs?

Sorry, this suit is just stupid beyond belief, imo.

 

[Krugerrand]

Thats not how stocks work - the price already reflects the expected profitability in just the same way the stock price reflected the 5000 cars a week and when it finally occurred the stock actually fell.

But as I said, short and medium term the investors are hurt if the deal doesn't go through, they bought at inflated prices.

There’s zero hurt if they don’t panic and sell. Zero. It’s paper loss. Buy and hold and they’ll be fine. Profitability will in fact push the price beyond any current or past SP.

The price they bought at was not in fact inflated. The price currently is deflated thanks to short sellers and FUD.

The deal will go through, I’m certain. It’s just a matter of timing. Based on data provided on this forum of past de-listings, I’d guess within 6 months.

 

[Just a Reader]

Well its up to the shorts to PROVE that it isn't secured. How they are going to do it beats me

Tesla is a public listed company. It's not Musk's private enterprise run from a garden shed. I suppose there are procedures to force disclosure of information during legal proceedings.

 

[Electroman]

Tesla is a public listed company. It's not Musk's private enterprise run from a garden shed. I suppose there are procedures to force disclosure of information during legal proceedings.

Shorts - work hard. Put the breaks on the man, even on a technicality or anything. Hook or crook you have to make money.

 

[Krugerrand]

Tesla is a public listed company. It's not Musk's private enterprise run from a garden shed. I suppose there are procedures to force disclosure of information during legal proceedings.

Are you sure about that? We all know the Gigafactory is a Potemkin Village. Wouldn’t be a stretch that Fremont factory is in fact a garden shed. You know how easy it is to photoshop nowadays!! A 3 year old can do it. At best it’s a tent.

 

[ggr]

Its also wise for Tesla to submit a 8-K form to the SEC explaining the announcement within 4 working days of the tweet

If musk really wanted to hurt the shorts he'd have given NO warnings

The problem as I see it is that the Saudis announced taking a stake in Tesla, and the consequent price rise threatened Elon's plan at $420, so he had to announce it early while it still meant something. Without all this confusion, I wouldn't have been surprised to see the stock go to at least $400, at which point a takeover at $420 would be dead on arrival.

 

[bhzmark]

The problem as I see it is that the Saudis announced taking a stake in Tesla, and the consequent price rise threatened Elon's plan at $420, so he had to announce it early while it still meant something. Without all this confusion, I wouldn't have been surprised to see the stock go to at least $400, at which point a takeover at $420 would be dead on arrival.

Interesting point. I’ve been wondering if there was a connection between FT contacting Tesla for comment on the Saudi investment that morning, and then Elon tweeting the go-private transaction later that morning in advance of FT reporting. Is there a connection between the two? Did the FT reporting prompt Elon to disclose the go-private? I can’t think of a strong connection. Perhaps they knew the Saudi investment reporting would bump the stock price, and then the go private would have to be a premium to that new higher price? So disclosing in front of that Saudi investment report would disclose the deal as it was agreed under the current stock price? That doesn’t seem very likely, but I can’t think of anything else.

Its also wise for Tesla to submit a 8-K form to the SEC explaining the announcement within 4 working days of the tweet

If musk really wanted to hurt the shorts he'd have given NO warnings

There is no mandatory 8-K disclosure. Tesla already disclosed what they want to disclose through the employee letter/blog post and the director statement. Repeating that information on a voluntary 8-k serves no purpose — except to quiet people who don’t understand the purpose and requirements of 8-k disclosures difference with Reg FD disclosures (the blog post and director statement and probably all the tweets).

 

[replicant]

Perhaps they knew the Saudi investment reporting would bump the stock price, and then the go private would have to be a premium to that new higher price?

I don' get it. The Saudis's move would have been disclosed when their share would have reached 5% and the price would have jumped accordingly. But that would also have made it difficult for the Saudis to increase their share (the more they buy, the more expensive it becomes).

So I thing it's more probable that Elon tried to use this early investment to make his case to go private easier: now, the board is discussing with both the Saudis and Elon's friends with a potential entry price of 420. All participants in the buy out are winning: the Saudis (as the 420 price serves as a fixed, low bar for as many shares as they want), Elon (who's now forcing all bidders to let him full control over the company), and Elon's friends (who don't have to fight the Saudis).

Only those who will sell will lose (mutual funds who can't hold private shares and, maybe, non accredited investors).

 

[renim]

i would assume that funding secured effectively implies that an agreement that not enforceable under USA law. which is an issue.
if Elon was casting around an idea with his billionaire associates, some of whom come from China or Middle East. it seems plausible that some see a little insider trading opportunity, illegal in USA, but unenforceable against countries that couldn't care less. So with Saudis buying a stake, that forced Elon's hand to prematurely reveal intent while funding secured, but not funding enforceable.

for an aussie take on funding legally secured but not enforceable see Fortescue's Andrew Forrest
How ASIC blew $30 million on Andrew Forrest

'Aside from admonishing ASIC, the High Court majority concluded it would be “extreme or fanciful" for investors to believe the Chinese-signed contracts could ever be enforced in Australia.'

this case dragged on and on, eventually it was found to be baseless, but the government bureaucrats pursued it ruthlessly.

 

[Yggdrasill]

All that's required for "funding secured" to be legally okay is for Musk to sincerely believe that funding is secure. Now, one can debate how much funding and how secure that founding would have to be for Musk to sincerely believe funding is secure, but there's definitley some wiggle room. Musk could have worked out around 20 billion is needed to go private, and then gotten a "sure, I'll give you 20 billion" from Larry Page, and that would be enough for the tweet to be okay. This is why shorts shouldn't get their hopes up regarding legal action against Musk.

But most likely, Musk has a workable plan for taking Tesla private. Not just some empty promises and hope.

 

[GeorgeSymonds]

Update on Taking Tesla Private

He's finally elaborated. I'm still not of the opinion secured is a phrase I'd use, to me that would imply a signed memorandum of understanding or a formal document and not a "feeling leaving a meeting" whereas he admits there is no current formal proposal. No doubt others will take completely the opposite view as its Musk.

I still don't get why he wants to do a deal with the Saudis, they've a very vested interest in keeping oil flowing, plus if he has an issue with others interfering with the business, a shareholder who could be in for about 38% (they already own 5% and he predicts 2/3 will keep their shares meaning 33% need to be covered) would give them significant leverage on the board and if the % goes higher, they may have a controlling interest in the firm.

 

[adiggs]

...

I still don't get why he wants to do a deal with the Saudis, they've a very vested interest in keeping oil flowing, plus if he has an issue with others interfering with the business, a shareholder who could be in for about 38% (they already own 5% and he predicts 2/3 will keep their shares meaning 33% need to be covered) would give them significant leverage on the board and if the % goes higher, they may have a controlling interest in the firm.

One way of thinking about it is that the Saudis, like the Norwegians, want to diversify their economy away from oil. That doesn't mean shutting down the oil and the money that comes from it, but it does mean creating additional non-oil sources of income.

 

[GeorgeSymonds]

One way of thinking about it is that the Saudis, like the Norwegians, want to diversify their economy away from oil. That doesn't mean shutting down the oil and the money that comes from it, but it does mean creating additional non-oil sources of income.

I understand that argument, but if you had a foot in both camps you might just be tempted to manipulate for your overall good and I suspect oil will win that one in the shorter term with the Tesla position eventually coming through. Musk has the mantra he wants to accelerate change, I can't see the Saudis sharing that view.

 

[Just a Reader]

All that's required for "funding secured" to be legally okay is for Musk to sincerely believe that funding is secure...

I suppose that's the new "Donald Trump doctrine of corporate governance"? You may tweet any old nonsense as long as you "believe" it to be true? No duty to have such an announcement vetted internally before going public?

 

[FirebirdAlpha]

The most damning line of that 8K has to be this one:

The special committee has not yet received a formal proposal from Mr. Musk regarding any Going Private Transaction nor has it reached any conclusion as to the advisability or feasibility of such a transaction.

Musk committed securities fraud. The reason he hasn't delivered a proposal is that it doesn't exist.

It wasn't so bad to say his desires to go private, but he crossed the line by naming a specific share price and giving "certainty" for all phases but a shareholder vote.

Elon Musk made multiple materially false statements.

 

[Yggdrasill]

Musk committed securities fraud. The reason he hasn't delivered a proposal is that it doesn't exist.

It wasn't so bad to say his desires to go private, but he crossed the line by naming a specific share price and giving "certainty" for all phases but a shareholder vote.

Elon Musk made multiple materially false statements.

They haven't received a *formal* proposal. They have however been in informal talks.

 

[Mario Kadastik]

The most damning line of that 8K has to be this one:



Musk committed securities fraud. The reason he hasn't delivered a proposal is that it doesn't exist.

It wasn't so bad to say his desires to go private, but he crossed the line by naming a specific share price and giving "certainty" for all phases but a shareholder vote.

Elon Musk made multiple materially false statements.

No he didn't. He said he's considering taking it private at 420 and funding is secured (he has sources of funding that he deems sufficient to make the deal happen).

Your last straw is fraud hence this weird clinging to it, but no fraud has been committed. Read Elon's blog post and you'll understand why an offer isn't on the table. He now has one backer, but he'd prefer to first make sure how many current investors will remain as well as widen the pool of backers to reduce the % of the company that the backers would have control over. All of that is due diligence towards the shareholders. NO FRAUD!