Yeah, and here's a quick list of major flaws in the the SEC's lawsuit, which all make the lawsuit internally inconsistent:
- By August 22, just two weeks after the tweet, in an effort to secure even better going-private terms for shareholders, Elon had not just one but two prospective buyers in the going-private transaction: the Saudi PIF with a target asset range of 2 trillion dollars, who already bought 5% of Tesla, and a consortium of buyers led by the fund that took Dell private: Silver Lake. Why is the SEC's complaint entirely silent about these two independent sources of funding? Isn't the fact that what Elon wrote was true an obvious absolute defense against any allegations of fraud, bad faith or recklessness?
- The SEC complaint is asking Elon to "disgorge gains": "Ordering Defendant to disgorge, with prejudgment interest, any ill-gotten gains received as a result of the violations alleged herein;". But Elon did not sell or buy any stock in this time period, so the gain is zero. It's a very weird kind of alleged 'fraud' that the ostensible perpetrator did not even try to profit from. How does the SEC reconcile this flaw of logic in their legal theory, and why are they asking for unprecedented relief for an action that did not benefit the ostensible perpetrator in any fashion, in fact it hurt the valuation of his stake in Tesla? Maybe the real explanation is that Elon thought he's acting in the interests of shareholders by informing them about the going-private efforts?
- Considering the +6% price action caused by Elon's tweet as "harm to investors" is laughable:
- Firstly, it's about twice of Tesla's daily volatility, and it was reversed in two days. The SEC complaint alone caused a drop of -14% in the stock price, if it's adjudicated and found to be the fabricated legal nonsense it appears to be at first sight, it will have done more than two times the harm to shareholders that Elon is accused of harming shorts. If Elon acted "reckless" on acting on not 100% complete information, what is the SEC's action if not "doubly, triply reckless"? Will the SEC start enforcement action against their own lawyers who make up fantasy legal theories to hurt a company?
- Secondly, the SEC is on very thin legal ice defining short sellers as "investors": when Tesla stockholders gain, shorts lose, and when Tesla stockholders lose, shorts gain. So per definition it's the fiduciary duty of Tesla's board and Elon Musk in particular to help Tesla shareholders, which causes losses to short sellers. Shouldn't the SEC be enforcing the interests of Tesla shareholders, instead of the interests of Tesla anti-shareholders? Here's the specific language the SEC uses in their lawsuit: "By August 2018, more than $13 billion worth of Tesla shares were being “shorted,” meaning they were sold by investors who did not own them at the time of the sale." Why are the SEC lawyers who wrote this suit siding with Tesla shorts, against the interests of Tesla investors?
- Why did these SEC lawyers rush enforcement action, and why did they hurry to file the lawsuit just two trading days before the critical Tesla Q3 production report, which is expected to be hugely negative to shorts. Or will the SEC add the legal theory to the complaint that Tesla making too many cars which are too popular is unfair to short 'investors' and causes them losses?
In short: 1) what Elon tweeted was true twice over; 2) he did not gain; 3) the alleged harm was not to Tesla shareholders but to Tesla anti-shareholders (shorts); 4) which the SEC should be protecting shareholders from, not siding with...
I believe the SEC lawyers who wrote this complaint should be disbarred for recklessly rushing a frivolous lawsuit that caused billions of dollars of damages to investors, and each and every SEC employee involved in this debacle of a lawsuit should be investigated for illegal leaks and illegal ties to short sellers.