
SEC Sues Musk and Seeks Ban for His Tweets on Go-Private Deal - tysone
https://www.bloomberg.com/news/articles/2018-09-27/elon-musk-is-sued-by-securities-and-exchange-commission-docket-jml0doi2
======
chollida1
This comment I made a few weeks ago is coming alot closer to the truth than I
would have expected.

I hope for Space X and Tesla's sake that the reports of a directory and
Executive ban don't come true.

[https://news.ycombinator.com/item?id=18016250#18016292](https://news.ycombinator.com/item?id=18016250#18016292)

SpaceX is doing well, Tesla has pulled itself back from the brink and may
actually become a profitable car company.

All Elon had to do was keep his head down and not pick twitter fights....

 __EDIT __one thing I should point out is that some people have questioned if
the tweet had any adverse affect at all on the shorts, given that the stock is
down now.

The answer is hell yes and the fact that the stock ash gone down since the
tweet only strengthens the shorts case.

The reason is that when you are short the biggest issue you have is that the
stock could go against you, in this case that means it could go up. So to
guard against that you generally have a price level in which you would exit
the trade.

So when Elon tweeted, a whole whack of shorts got stopped out, intentional or
by their risk limits. Infact there is a lawsuit already filed by Citron due to
this. That momentary bump, while short lived was more than enough to close out
some short positions.

If he's found to be in the wrong here by the SEC, then it seems like it
wouldn't be too hard to find him guilty in the coming lawsuits.

~~~
djsumdog
I'd hope the company itself would be fine. I really hate this idea of the
grand visionary. A good friend of mine who is a mechanical engineer despises
Musk.

I listened to a bit of his Joe Regan interview and when Regan asked him how he
has the time to do all of the things he does, there are smoke jokes about him
being an alien, but not once did he say, "Well I have an amazing team of
engineers" and credit all the thousands of people in his organizations that
actually do the work.

He made it sound like he just constantly engineers things, but I find it hard
to believe that at any point he's sitting down with CAD and fluid dynamic
applications and mapping out experiments for rocket prototypes. I don't doubt
he's capable of doing that with his background (or learning how to do it) but
it's much more likely there is a whole team of really dedicated experts that
he just leaves uncredited.

Are Apple products different now that Jobs are gone? One could argue that, but
the core people that make and design all their overpriced, planned
obsolescence devices are still there, often uncredited, while everyone else
likes to focus on the captain of a ship.

~~~
stcredzero
_Are Apple products different now that Jobs are gone?_

Yes. Jobs as local despot acted as a curb to bad decisions. Jobs had a vision
which acted as a countervailing force to keep Apple from being completely
sucked into being a money grubbing luxury goods company.

 _the core people that make and design all their overpriced, planned
obsolescence devices are still there, often uncredited, while everyone else
likes to focus on the captain of a ship._

We know from the historical record that Jobs had quite good judgement, even in
technical fields, and we know that he countermanded and convinced executives
and managers to steer them in the right direction. I suspect that the Apple of
today is descending into being just a money-grubbing luxury goods company.

~~~
threeseed
This is just revisionist history and completely wrong.

Steve Jobs pretty much set Apple on the premium goods track when he returned.
The iMac, iPod, iPad, iPhone were all developed under his watch and all were
premium priced.

Apple has pushed the margins higher but that's only because the market can
absorb it. Computing is more central to people's lives and they are willing to
pay a premium for a good experience.

~~~
asn0
I've started to think Apple is more competitive on laptops than it looks from
the price.

Every time I've priced out a laptop with similar configuration to my MBP
(including a good-quality display, NvME SSD, good battery life), it always
ends up costing about the same as an MBP. And then Apple's customer service
definitely tips in their favor (I've been spoiled by fast, convenient,
competent repair service at the Apple store).

So either everyone is making big margins on well-configured laptops, or the
perception of over-priced MBP's is misplaced.

~~~
chrisweekly
I was just commenting to my wife how remarkable I find it that my 2012 Macbook
Pro 15 Retina is meeting all my needs as a software consultant. I used to
think 3 years, maybe 4, was the useful lifespan of a high-end machine for
daily professional use. In a few months it'll be 7 (seven) years old. It has 3
or 4 dead pixels, but everything else about it is working flawlessly. Maybe
they don't make em like they used to, but man have I gotten my money's worth
out of this one.

~~~
snowwrestler
I'm posting this from a Macbook Pro I bought in November 2008. My family uses
it daily.

My daily work computer is a 2012 Macbook Air which I dropped from a standing
height 4 years ago. It has one bent corner but still runs great.

~~~
visarga
I still have iMacs from 2007 that are being used by my kids. I only upgraded
the HDD to SSD a couple of years ago and they work flawlessly. No viruses, no
tech support needed for 10 years.

That is just amazing hardware, but on the other hand, I have a pair of AirPods
that just can't autoconnect to my MacBook unless I fiddle with the Bluetooth
and speaker icons in the toolbar every time. And AirPods were fucking
expensive and both are produced by Apple. What gives? How can they be so
incompetent in making a wireless device connect to another wireless device?

~~~
chrisweekly
Yeah Bluetooth sucks, and this is compounded by Apple's subpar BT handling in
macOS.

That said, my Sennheiser HD1 headphones are absolutely amazing, and I don't
miss being physically tethered to my laptop.

------
Animats
He definitely lost it. And it's going to cost him. This is an open and shut
case against Musk. He definitely sent out that tweet. Yes, maybe just not
enough sleep and too many drugs. Not a good excuse.

Tesla might do better with a new CEO. They're past the vision stage. Tesla's
problems today are all those of running a big auto plant.

Musk might do better focusing on Space-X.

~~~
anonytrary
Elon Musk has always had a disdain for the responsibility of running a public
company, it seems perfectly reasonable that he tweet, in exasperation, that he
wishes to make the company private. Why do so many people in this thread want
the only guy making (rockets && green cars && batteries && solar && ...) to
fail so badly? The guy smokes weed once on camera, now he's a witch and needs
to be hunted down? We care about the wrong things.

~~~
_Microft
Why they want him to fail badly?

They're maliciously envious - which is the product of an overly good self-
image colliding with reality. They wish him harm because if he fails, he'll no
longer remind them that that's how it looks like to actually achieve
something.

~~~
Cthulhu_
Who are "they"? Anyway I can think of two parties: short sellers, who actively
bet on Tesla shares losing value - and who are very likely behind all the
negative press about Tesla, including making sure every accident a Tesla ends
up in (especially if it's down to autopilot or involves fire or a death) stays
in the news for weeks if possible.

The other would be competing car makers, who only now are starting to realize
that electric cars are the future, except they're 5-10 years behind Tesla. I'm
sure they'll catch up soon enough, given how they're much better at mass
production than Tesla is atm, but they're way behind. Tesla will probably
pivot to focus on their other endeavours - batteries (building the largest
battery factory in the world), charging stations (building the largest
charging station network in the world), green energy (solar panels and large
scale battery storage), etc.

~~~
_Microft
Short sellers and competitors have a financial reason to not like Musks
success. Average Joe does not and still there are enough of them hating him
and/or begruding his success. It's "them" that I was talking about.

------
theptip
I think there's a bit of overexcitement going on in this thread; it doesn't
look to me like Musk is going to jail on this one.

This part is interesting:

> The SEC had crafted a settlement with Musk that it was preparing to file
> Thursday morning, the Wall Street Journal reported, citing unidentified
> people familiar with the matter. Musk’s lawyers called SEC lawyers to say
> they were no longer interested in proceeding with the agreement, it said.

If his lawyers had a settlement lined up, and then retracted it, that means
that they are confident they can win a better outcome in court. The deal they
were going to cut did not involve Musk going to jail, so the outcome that
Musk's expensive lawyers are betting on by retracting the settlement
presumably also doesn't involve that.

~~~
anonu
Part of the deal was that he step down as CEO. I think that was not acceptable
to him. Ultimately, I believe he will lose. A strong operator to handle
traditional car company problems will make TSLA sky rocket

~~~
flud
Source pls?

~~~
anonu
Faber just said on CNBC the settlement was couldn't be chairman for 2 years,
add a couple independent directors, and pay a personal fine. I initially heard
"step down"... But it seems just from the board for a couple years

------
not2b
He was trying to bankrupt the short-sellers, and he was doing it by lying: the
price would soar, their options would be called, and they'd lose their shirts,
all for a lie. When you're head of a public company, that's a crime. Not only
will the SEC come after him, but the short sellers can probably sue him too. I
have huge respect for his engineering ability, but he has messed up badly.
He's overextended and it seems his conduct lately shows that he's melting down
from overwork.

~~~
andys627
> He was trying to bankrupt the short-sellers, and he was doing it by lying

I'm out of the loop - can you point me to some proof of this?

~~~
village-idiot
The actual complaint includes a few tweets by Musk warning shorts to get out
within a specific timeframe.

~~~
rcMgD2BwE72F
So they were warned of possible actions that might cost them, like going
private.

Damn if you do, damn if you don't.

~~~
village-idiot
Yeah, but he wasn’t actually going private. He did not follow any procedure to
do that (casual talks without firm agreements don’t count).

What it does do is establish a plausible motive for stock manipulation, which
is a problem for a jury trial.

------
WheelsAtLarge
The book The PayPal Wars: Battles with eBay, the Media, the Mafia, and the
Rest of Planet Earth, details Musk's time at Paypal and pretty much describes
him as an eventual hindrance rather than a help. He was eventually ousted from
the company. Peter Thiel was the one that was able to nurse the company to
success.

He was vital to get the company started but eventually, he was difficult to
work with. Looks to me that history repeats itself. He's a great visionary but
that does not translate to a great CEO.

He needs to get a new CEO at Tesla and focus on another company where I'm sure
he'll make a great impact. He truly has great vision but the everyday minutia
of running a company probably irritates and bores him.

~~~
propman
I can only think of Elon as the only person to create THREE multi billion
dollar companies in wildly different industries.

Elon is a fantastic CEO AND visionary. I personally know people who could be
making double specifically work at spacex because they believe in his vision.
Elon is able to get Supreme talent and productivity for pennies on the dollar.
He’s able to market Tesla and spaceX to billions with such a positive
favoriability unlike anything we’ve ever seen. SpaceX and Tesla don’t have a
marketing budget because of Elon. Car companies spend billions marketing, Elon
tweets saving billions for Tesla which he reinvests in r&d.

The entire world will lose if Elon is forced out. He’s the biggest fighter for
climate change and space travel in modern history, greater than Al Gore in
marketing and execution, greater than Buzz Aldrin, Tyson, and cosmos. I’d much
rather have an honest relatable Elon Musk than a suit. I’d rather have
creativity than suffocating structure.

Elon is a great CEO. I would pick him over almost anyone alive.

~~~
hooloovoo_zoo
To be fair, Musk created neither Tesla nor Paypal.

~~~
propman
Well he turned Tesla into a multi billion dollar behemoth in a short time and
revolutionized the electric car industry. He didn’t create Tesla but he did
“create” Tesla the billion dollar company.

PayPal is more complicated agreed. Elon’s portion of it might be a billion due
to inflation? But regardless he set the basis for it.

------
Rooster61
I very much hate to see this. Not for Musk's sake, as he has been pretty much
asking for something like this to happen. I hate it because of the damage it
will do to Tesla and SpaceX when he's likely banned from leading a company.

Tesla's not exactly lighting the world on fire in terms of potential long term
success, but SpaceX really has been doing well in recent years. The fact that
they are already refurbishing solid rocket boosters is a BIG deal. Losing a
CEO is a very turbulent thing, and this will only set back their progress
towards affordable space flight. I hope both companies are already grooming a
suitable replacement.

~~~
dragonwriter
> I hate it because of the damage it will do to Tesla and SpaceX when he's
> likely banned from leading a company.

He would only be banned from leading a public company; SpaceX is still private
(and, heck, maybe he could realize his plan of taking Tesla private, too.)

So, SpaceX wouldn't be directly effected.

~~~
cma
SpaceX could be affected by him losing his security clearance for illegal drug
use though.

~~~
Reelin
So US interests could be harmed by damage to an important US company, itself
entirely due to backwards US drug policies? I don't think Musk is the problem
in that case...

~~~
MBCook
Yes, because he showed such amazing judgment. It’s obviously the law that’s
messed up.

~~~
woah
It obviously is. Countless billions of dollars wasted and millions deprived of
their freedom for what? Prohibition will go down in history as one of the
biggest mistakes of our time.

------
mimerme
Does anyone else find it amazing that these days social media posts are
becoming official government documentation? Who would've thought that the very
platforms where we once just shared pictures of cats are starting to run our
our elections and stock markets.

~~~
briatx
Tesla made it easy for them. From the SEC filing:

> 13\. On November 5, 2013, Tesla publicly filed a Form 8-K with the
> Commission stating that it intended to use Musk’s Twitter account as a means
> of announcing material information to the public about Tesla and its
> products and services and has encouraged investors to review the information
> about Tesla published by Musk via his Twitter account.

~~~
abhiminator
>Musk’s Twitter account as a means of announcing material information to the
public about Tesla and its products and services

I do not understand why he did not hire a PR firm to run his Twitter given the
high stakes of each of his tweets. This is really bad judgement on his part.

~~~
briatx
I had the exact same thought. Probably a lot of ego and hubris was involved.

------
anarazel
The actual complain: [https://www.documentcloud.org/documents/4950588-SEC-v-
Elon-M...](https://www.documentcloud.org/documents/4950588-SEC-v-Elon-
Musk.html)

~~~
djoldman
PDF: [https://assets.documentcloud.org/documents/4950588/SEC-v-
Elo...](https://assets.documentcloud.org/documents/4950588/SEC-v-Elon-
Musk.pdf)

------
NN88
SEC wants to remove him from the head of the company:
[https://twitter.com/kadhimshubber/status/1045407900259295233](https://twitter.com/kadhimshubber/status/1045407900259295233)

~~~
slg
Are there any previous examples of someone doing something similar to what
Musk did and the punishments they received? I don't normally follow SEC cases,
but this seems like a pretty extreme potential punishment compared to the slap
on the wrist that many people were predicting.

~~~
rpedela
Yes. SEC litigation releases, press releases, report major updates to cases
including the resolution. Here is a Google search for "prohibited acting
officer", the key legal phrase/keywords, on the relevant section of the SEC
website.

[https://www.google.com/search?q=prohibited+acting+officer+si...](https://www.google.com/search?q=prohibited+acting+officer+site%3Awww.sec.gov%2Flitigation%2Flitreleases)

~~~
slg
I was asking what the punishment is for similar crimes and that isn't the same
as asking for what crimes have caused a similar punishment. I looked through
the first few results on that page and they all seemed, in my opinion, to be
more severe crimes than what Musk is accused of doing.

~~~
rpedela
Add "misleading" to the search and the first few results seem similar to what
Elon did. Making public, false, and misleading statements to investors is
something the SEC gets pretty upset about.

[https://www.google.com/search?q=misleading+prohibited+acting...](https://www.google.com/search?q=misleading+prohibited+acting+officer+site%3Awww.sec.gov%2Flitigation%2Flitreleases)

~~~
slg
From the first result [1]:

>In its August 28, 2012 Complaint, the Commission alleged that, between 2005
and 2008, Wwebnet, Inc., a video software company, and Kelly made false and
misleading statements and omissions to investors, including...

The accusations there are repeated and occurred over the course of several
years. Musk has been accused of a single case of wrong doing. Musk's seems to
be a much lesser crime. Also by still including the punishment in that search
you are missing any similar accusations that received lesser or more severe
punishments.

[1] -
[https://www.sec.gov/litigation/litreleases/2015/lr23177.htm](https://www.sec.gov/litigation/litreleases/2015/lr23177.htm)

~~~
rpedela
The answer to your original question is "yes". The SEC does not like when CEOs
make misleading statements even once. All I did is point you in the right
direction. I am not going to go through 100s of cases to find something that
is exactly like the Elon Musk case for you. You are welcome to change the
Google search yourself.

~~~
slg
You are obviously under no obligation to do research to answer my question. I
wasn't expecting anyone to spend time reviewing hundreds of cases to answer my
question. I frankly don't care enough about the answer to review hundreds of
cases myself. I simply proposed a question towards anyone who is more familiar
with SEC punishments than I am. However, if you are going to answer my
question I think it is fair for me to debate the validity of that answer.

------
browsercoin
I'm perplexed how Musk could act without thinking of the consequences? Now I
fear that he will be banned from SpaceX as well, when you are convicted of
fraud by SEC, it will impact your duties at other companies.

It takes decades to build a reputation but it can be destroyed overnight with
a single tweet.

~~~
tinkerteller
The guy hasn't been sleeping and short sellers had essentially all but
cornered him to the extent he would go bankrupt. I don't blame him too much
except that he hasn't got his #2 with whom he can vent out, calm down and
strategize. Gates had Ballmer, Page has Brin, Zuck has Sanders. Who does Musk
has? Not acquiring #2 is his single biggest failure.

~~~
alehul
He absolutely has one in Shotwell on the SpaceX side.

Maybe that's part of the reason that Tesla is the company causing him all the
issues.

------
tareqak
CNBC article: [https://www.cnbc.com/2018/09/27/tesla-falls-4percent-on-
repo...](https://www.cnbc.com/2018/09/27/tesla-falls-4percent-on-report-elon-
musk-sued-by-sec.html)

SEC Press release: [https://www.sec.gov/news/press-
release/2018-219](https://www.sec.gov/news/press-release/2018-219)

United States Securities and Exchange Commission v. Musk [PDF uploaded to
Scribd by CNBC]: [https://www.scribd.com/document/389617063/United-States-
Secu...](https://www.scribd.com/document/389617063/United-States-Securities-
and-Exchange-Commission-v-Musk#from_embed)

------
romed
As I said nine days ago in this box and was roundly downvoted therefor: "Good
chance that Musk will get placed on the bad actors list and will be unable to
serve as an officer or executive of Telsa." What I don't understand is how
this took 10% of the price of Tesla shares. How is it possible that this
event, which was a 100% certainty, was not already baked into the price?

~~~
daveguy
I think most people thought Musk would get off with a fine. For a company
partially driven by a cult of personality (at the very least given a
significant benefit of the doubt). That hope was diminished and without Musk
the entire company will be perceived differently.

------
rifung
"The suit seeks an order from a judge barring Musk from serving as an officer
or director of a public company, a request often made in SEC lawsuits, as well
as unspecified monetary penalties."

Does this imply that they want to remove him from being CEO and from the board
of directors?

~~~
londons_explore
Or to simply make it a private company and stay CEO...

~~~
ucaetano
> make it a private company and stay CEO

Yeah, with what money?

------
Cshelton
I'm willing to bet the only thing that will come of this is a fine and a slap
on the wrist.

~~~
dawhizkid
...and irrepairable loss of investor trust

~~~
Cshelton
I don't believe so. I have been a Tesla owner and investor for a long time
now. I know where Elon comes from, what missions and goals he has stated for
years now, and what he is trying to accomplish.

I promise you, Elon legitimately thought there would be an opportunity to go
private again. He's said he wanted to do so in the past, and even has said
they never wanted to go public, but were left with no choice. I don't think
any part of Elon was trying to commit fraud or security manipulation. He made
a mistake, we all do. He said something that should not have been said at that
given point of time. I'm sure he was excited. He even said he typed that tweet
in the car after leaving SpaceX.

Should he be fined? That is up to the SEC. Will I and many other investor lose
trust in what Elon's mission is? Absolutely not.

~~~
dragontamer
> I promise you, Elon legitimately thought there would be an opportunity to go
> private again.

That's cool and all. And that's probably why the DoJ case will fail (at least,
I'm betting that the DoJ case will turn up nothing).

But this is the SEC: they only have to prove recklessness or negligence. That
Musk was NEGLIGENT in his ability to properly vet the information before
tweeting.

In particular:

> 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.

[https://www.scribd.com/document/389617063/United-States-
Secu...](https://www.scribd.com/document/389617063/United-States-Securities-
and-Exchange-Commission-v-Musk)

As a CEO, his responsibility is to report on the news of the company to his
investors in a responsible manner. If Musk is negligent and/or reckless about
the facts, then that is ALONE sufficient to have him removed from the
position.

That's the thing about this SEC case. They do not have to prove scienter
(criminal knowledge of wrongdoing) or malice. They only have to prove
recklessness or negligence.

EDIT: Upon further review, paragraph 79 claims that Elon Musk has scienter of
these events. So the SEC is in fact claiming that Elon Musk deliberately knew
that making these statements were wrong, and did it anyway. This is above and
beyond "reckless" or "negligent" !!

~~~
rohit2412
I find it hilarious that intent is under doubt. Somehow people have forgotten
"short burn off the century". If shorts squeeze did happen, there would be
cheering everywhere.

~~~
dragontamer
Personally, I don't doubt intent. But "Beyond a reasonable doubt", as well as
the necessity for a "malice" in the DoJ's case makes me think that... the DoJ
has way too hard of a case to pull together.

I mean, I might be proven wrong. But... showing off a couple of rage tweets in
court to prove malice doesn't seem plausible to me. Would a Jury of 12 (and
remember: all 12 have to agree) be convinced over a couple of "who likes
short-shorts" tweets?

If a SINGLE jury member, 1 out of the 12, disagrees, then you get a hung case
aka a mistrial. As per the rules of the DoJ investigation anyway. That's why I
don't think the DoJ will go anywhere, because proof and evidence is at a way
harder standard in a criminal case.

------
nigealj
This is a serious deal. The rest of the year is going to be a real test for
Tesla! It'll be real interesting to see if they can rebound from this.

I wonder if the Tesla board is thinking of doing an Uber and replace Musk with
a more calmer executive! Wouldn't be surprised if he gets fired after this.

~~~
twblalock
> I wonder if the Tesla board is thinking of doing an Uber and replace Musk
> with a more calmer executive! Wouldn't be surprised if he gets fired after
> this.

I would be. They have stood by him so far, this isn't going to push them over
the edge. Besides, who would they replace him with?

If the SEC fines him, he'll pay the fine and get on with his life.

~~~
quirkot
Unless they ban him from being an executive at a publicly traded company

~~~
londons_explore
Couldn't he assign the janitor to be the official 'CEO', but then give himself
title of 'Visionary' and still make all the decisions?

~~~
jonknee
The SEC would not find this amusing.

~~~
blotter_paper
Putin would!

~~~
dang
Please don't do this here.

------
treis
>According to Musk, he calculated the $420 price per share based on a 20%
premium over that day’s closing share price because he thought 20% was a
“standard premium” in going-private transactions. This calculation resulted in
a price of $419, and Musk stated tha the 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.”

[https://www.documentcloud.org/documents/4950588-SEC-v-
Elon-M...](https://www.documentcloud.org/documents/4950588-SEC-v-Elon-
Musk.html) (Page 7-8)

Wow, what a dumb thing to do and even dumber to admit to it.

~~~
rayiner
It's better for him if it's an obvious marijuana reference. That way he can
argue it was a joke that no reasonable investor would have relied upon.

~~~
rococode
I'm curious, does "reasonable" actually matter in a case like this? Say he
tweeted "I just killed someone LOL" and the stock price drops. Could that also
be construed as misleading investors?

~~~
rayiner
The SEC needs to prove he made a “materially” false and misleading statement.
The Supreme Court has defined a “material” fact for purposes of the securities
laws to mean that there is:

> a substantial likelihood that the...fact would have been viewed by the
> reasonable investor as having significantly altered the “total mix” of
> information made available.

If a statement is an obvious joke, no reasonable investor could have viewed it
as altering the mix of relevant information.

~~~
likpok
Could the SEC use as evidence the fact that the price went up post-tweet, and
down after Tesla recanted? That is arguably objective evidence of reasonable
investors taking his tweet as a material fact to their trading strategies
(i.e. by buying stock).

~~~
rayiner
Yes. Its not dispositive, because “reasonable” is a legal abstraction (so it
admits the possibility that there are unreasonable investors who don’t get the
joke), but it’s evidence.

------
jiveturkey
Page 21: "Prayer for Relief"

interesting that this kind of language is accepted legalese

par. 80.IV and 80.V seeks both civil penalties _and_ removal from office.

Is it feasible that Musk/Tesla can negotiate only penalties, thus keeping him
on the board? Given Musk's position of power over the board, and importance to
the company, I could see the board agreeing to it, but would the government.

~~~
adrianmonk
The language doesn't surprise me particularly.

"Pray" is an old word that means to ask. Hence "prithee", which is kind of a
mashed together "pray thee" (which means "ask you"). And "prayer" is noun form
of that verb.

Yes, the words are really old (archaic-sounding if not actually archaic), but
that happens all the time in legalese.

And yes, they have religious connotations, but they are also used in secular
ways. For example, from Shakespeare's "Romeo and Juliet": "I pray thee, good
Mercutio, let's retire: The day is hot, the Capulets abroad".

~~~
Tomte
I first came across "pray" (as a non-native speaker) through Sherlock Holmes.
"Pray sit down" is ubiquitous in his stories.

------
_Codemonkeyism
Glad it's only a CEO, imagine what a president could do with Twitter!

~~~
the_clarence
Someone has to explain that to me. Is the POTUS all powerful and can pretty
much say anything?

~~~
lostmyoldone
No, but the republican majority in congress refuses to hold him accountable,
and possibly voters too. Time will tell.

It is rather absurd that a CEO is seemingly held to higher standards then the
president.

------
ivraatiems
A short while ago (per my comment history), I asked whether Elon Musk should
remain as CEO of Tesla.

I think, for my part, the answer is clearly no. He might be brilliant, he has
undeniably had a hand in creating something awesome with Tesla and SpaceX's
technology, but he's now a danger to the very thing he helped build. This is
just _one_ of the lawsuits filed against him or Tesla in recent weeks that
have him as the primary cause. I want Tesla's mission to be achieved, I want
them to succeed, and to me, Elon Musk is one of the biggest stumbling blocks
in their way now.

Where does the buck stop? In my opinion, with Tesla's board, and Elon's ouster
as CEO.

Edit: Worth noting that Elon's removal as CEO is one of the remedies the SEC
seeks as well, and could thus be part of any settlement. (I'm not
knowledgeable enough to handicap how likely that is.)

Another edit: Tesla has no D&O insurance, and therefore might be liable for
whatever misconduct Elon is found to have done. That's a pretty big deal, and
also a bad move on Tesla's part in not insuring against their (known quantity
loose cannon) CEO. See
[https://www.dandodiary.com/2018/08/articles/securities-
litig...](https://www.dandodiary.com/2018/08/articles/securities-
litigation/tesla-investors-file-securities-suits-elon-musks-take-private-
tweets/)

~~~
drawkbox
If Elon Musk is removed as CEO at Tesla, Tesla is over.

I find it curious that an innovative American company pushing to help our
carbon problem by going electric is so lambasted, shorted, constantly under
attack. It cannot be argued that Tesla pushed forward both electric cars and
self-driving vehicles as a major force (original self-driving push was a DoD
X-Prize)

Personally I like when American companies succeed and push innovation forward.
I would have zero hope of that happening if they bring in some generic C level
executive like back in the day at Apple when they ousted Steve Jobs and
brought in John Sculley.

~~~
rayiner
> It cannot be argued that Tesla pushed forward both electric cars and self-
> driving vehicles as a major force (original self-driving push was a DoD
> X-Prize

Sure it can. Tesla has done basically nothing for self-driving cars, it's
technology is glorified lane-keeping. As to electric cars, the Model S is the
third best-selling electric car ever, after the Nissan Leaf and the Chevy
Volt. Both of those cars were introduced _before_ the Model S. Electric cars
are not yet mainstream, but when the become mainstream, they're going to look
a lot more like a Chevy Volt than a Model S or Model 3. (The sport-sedan
market Tesla is targeting is a niche, even if a very lucrative one. What
people really want is a $25,000-35,000 small cross-over SUV or pickup truck.)

~~~
colordrops
You are missing a few facts that completely oppose the point of your comment:
the model S is not Tesla's first electric - that would be the Roadster, which
was release a couple years before the other cars you mention. Chevy Volt is
not full electric and can't get very far on pure electric. And the Nissan Leaf
is a glorified golf cart that doesn't surpass 100 miles on a charge.

The frank truth is that both the better design and range of Tesla vehicles set
the stage for electric cars to be adopted by everyone rather than just special
interest groups.

You can be assured that every manufacturer in the world, such as BMW, is
building up electric manufacturing capability due to the success of Tesla, and
not Nissan.

~~~
rayiner
The Volt was also not GM’s first EV. Both the Roadster and GM’s EV 1 were
niche products. You can call the Leaf a golf cart, but it’s sold more vehicles
than the Model S. Yes the Model S has more performance, but it’s also a vastly
more expensive car.

As to other manufacturers, they were “building up electric manufacturing
capability” before Tesla. Toyota was selling thr first RAV 4 EV before Tesla
was even founded. Tesla didn’t have the first EV. It may have the best EV now,
but that hardly says anything—it’s much easier to make a $50-100,000 EV than
on at a mainstream price point. The remaining question is who is on track to
create products in the form factors people care about (not sports sedans) at
prices they can afford? At this rate, that’s not Tesla either.

~~~
colordrops
Are you aware that the RAV 4 EV used Tesla batteries?

Regarding the Roadster being "niche", it still looked like a normal car at
least, unlike the EV 1, and any other electric car at the time. Furthermore,
they had a roadmap to more affordable cars that still fit the moniker
"normal". Other car companies were just running their EV projects as
experiments, or as a way to appease California legislators to meet quotas, or
simply retrofitting a non electric frame with batteries in a way that left
much to be desired.

No one was trying to make a non-toy full electric car until Tesla.

~~~
rayiner
The first RAV 4 EV came out in 1997. Tesla was founded in 2003.

> No one was trying to make a non-toy full electric car until Tesla.

The Roadster was a toy, costing over $100,000 and selling approximately 2,500
vehicles, in the same ballpark as the EV1. The idea that it spurred GM and
Nissan to build completely different EVs for the opposite end of the market is
delusional. The timing also doesn’t work. It took Tesla several years to bring
the Roadster to the prototype stage. Counting back a similar length of time
from when the Volt was unveiled as a concept car, that means GM would’ve been
working on it since 2004 or so, years before the Roadster came out.

------
dmitrygr
He responded:

“This unjustified action by the SEC leaves me deeply saddened and
disappointed. I have always taken action in the best interests of truth,
transparency and investors. Integrity is the most important value in my life
and the facts will show I never compromised this in any way.”

[https://techcrunch.com/2018/09/27/tesla-ceo-elon-musk-
respon...](https://techcrunch.com/2018/09/27/tesla-ceo-elon-musk-responds-to-
sec-securities-fraud-charges/)

------
davidparks21
I'm quite doubtful this suit will succeed. To succeed the SEC would need to
prove intent to disrupt the market. You can certainly show that he had a
reason to attack short sellers, but he also has a long history of
communicating in exactly that manner. He probably also has plenty of evidence
of meetings that justify the statement. If that assumption is correct, given
his historical use of this medium of communication, I can't see how you prove
intent.

~~~
hn_throwaway_99
> He probably also has plenty of evidence of meetings that justify the
> statement.

By Musk's own description I don't see how any reasonable human being could
interpret the meetings he said he had with the Saudis as meaning "funding
secured". The verbal gymnastics he tried to use when explaining his tweet in
saying "I knew we could get a deal" made me think "Come on Elon, I don't even
think _you_ believe the bullshit you're peddling."

------
gniv
It looks more and more that Tesla will follow a trajectory similar to GM:
[https://hbr.org/2018/04/to-understand-the-future-of-tesla-
lo...](https://hbr.org/2018/04/to-understand-the-future-of-tesla-look-to-the-
history-of-gm)

(If you didn't know about early GM, like I didn't, the article is worth
reading.)

------
piker
The theoretical "go private" option under current circumstances is probably
out. Tesla would have to rely on Regulation D[0] to privately place its
securities in connection with going private. Being deemed a "Bad Actor" with
respect to Tesla could eliminate that option as long as Musk is still a
"Covered Person", which includes directors and executives, and, importantly,
large owners of the issuer[1]. As SpaceX presumably relies on Regulation D to
place its securities, this may have also already implicated SpaceX's ability
to rely on Regulation D going forward.

[0] [https://www.sec.gov/fast-answers/answers-
regdhtm.html](https://www.sec.gov/fast-answers/answers-regdhtm.html) [1]
[https://www.lexology.com/library/detail.aspx?g=6a9b59e7-1b37...](https://www.lexology.com/library/detail.aspx?g=6a9b59e7-1b37-476b-8edf-812f35935c91)

------
bogomipz
I thought the most fascinating part of the article was the following exchange:

>"About 20 minutes later, the company’s chief financial officer texted Musk:
“Elon, am sure you have thought about a broader communication on your
rationale and structure to employees and potential investors. Would it help if
[Tesla’s head of communications], [Tesla’s General Counsel], and I draft a
blog post or employee email for you?”

Musk responded, “Yeah, that would be great.”

Tesla’s Chief Financial Officer then replied, “Working on it. Will send you
shortly.”"

The CFO seems oddly nonchalant with this crazy development. Or is this just
sarcasm?

The individual then offers to draft up comms without even first inquiring
about that "rationale."? Is this what passed for normal at Tesla or were the
"WTF" and exclamation points redacted?

------
jacquesm
The irony of it all is that Elon Musk probably ended up making the people
shorting TSLA a lot of money with that stupid tweet.

Down to $266 in after hours trading:

[https://www.nasdaq.com/symbol/tsla/after-
hours](https://www.nasdaq.com/symbol/tsla/after-hours)

Ouch.

------
sunstone
Interesting legal point, does Musk have any legal duty to the Tesla shorts? If
I'm not mistaken they don't officially own the shares they short so I'm
thinking not.

On the other hand if the "shorts" are actively working against the interests
of "long" holders of Tesla stock and Musk works against their interests (but
in the interests of shareholders) how can that run afoul of the rules?

Not a lawyer so it may not be as black and white as this but I would
interested to hear from those that are familiar with legal precedents on this
issue.

------
Analemma_
How many different lawsuits and investigations is Elon now the subject of?
There’s this, the separate DOJ investigation, the lawsuits from private
investors who exited their short positions, the libel suit from the British
guy, possibly an Air Force investigation about the weed... am I missing any?

Even if every one of these turns out to be nbd, I wonder if it makes sense to
remove Elon just on the grounds that a) it’s embarrassing and b) he can’t
address all of these at once and still effectively run two companies.

~~~
noobiemcfoob
Isn't that kind of the point of piling lawsuits onto someone promising that
you see as competition?

~~~
huebnerob
Yes, exactly, I win every time because I just make my competition shoot itself
in the foot over and over, very simple.

------
Zarath
What a joke, there are plenty of scumbag and criminal leaders of corporations
and this is the guy who doesn't walk. It'll be a sad day for the world if this
guy goes to jail.

~~~
dabockster
It's like this clip from the 1990s Batman cartoon regarding the Joker's view
on the IRS.

[https://www.youtube.com/watch?v=G56VgsLfKY4](https://www.youtube.com/watch?v=G56VgsLfKY4)

Securities crime is almost always prosecuted in the US because of how much of
our economy depends on it being free of outside manipulation. This is why all
stock trades are tracked so intensely. A crook may be able to systemically
deprive people of health insurance and get away with it, but he/she will
almost certainly go to prison if caught manipulating the stock market for
personal gain.

~~~
Zarath
I believe it, but it's kind of stupid that GS or JPM "analysts" can
"downgrade" a stock and move it by 4%, and this happens literally every day,
but some guy who is going to put humans on Mars and fly them around the moon
is going to get shit for a tweet that was obviously a joke to anyone who isn't
a total moron.

~~~
yifanl
A tweet that moved the stock by >4%.

------
bentoscher
Alas, on the path to greater things achieved, quarrels of mankind see no
relief; to build a house of time and stone, requires an ounce of flesh and
bone.

------
supergirl
tesla might have succeeded if this guy was not ceo. if he is doing these kinds
of shenanigans in public, i can only imagine how he runs things internal.
also, from the lawsuit it seems like he is surrounded by yes men. nobody told
him what he did was stupid, instead the other executives immediately jumped on
board of promise train.

------
_Codemonkeyism
Hopefully it only hits Tesla (which never understood people excitement) and a
deal can be made he's staying head honcho (resarch? vision?) at SpaceX where I
really think he can help humanity (hopefully Mars will not become a land grab
as the US was, but I fear it's the same again)

~~~
slivym
This seems incredibly unlikely because his actions were so independent of
Tesla. They aren't pursuing Tesla right now, they're pursuing Musk personally.

------
tareqak
What would be the argument in his defense?

~~~
pommed
The shorts against Tesla were enormous. Millions (billions?) were put against
Tesla. You can't tell me that the shorters did not invest extra money to make
their short profitable. That extra money would go into PR to make Tesla look
like failing company. That is not fair play either... Basically Musk gave a
punch back after being bullied and stressed.

Self-defense?

Also the Tweet started with: "I am thinking of". Not matter of fact, but just
announcing what you are thinking of.

Anyway... maybe he can be CEO by proxy or focus more on leading the engineers.

~~~
sokoloff
> The shorts against Tesla were enormous. Millions (billions?) were put
> against Tesla.

It's definitely billions (about $10 billion short interest as of mid-
September-[0], not including options contracts). I'm very much a small-time
investor and I'm personally short well over a million dollars of $TSLA.

[0] - [https://www.nasdaq.com/symbol/tsla/short-
interest](https://www.nasdaq.com/symbol/tsla/short-interest)

------
VeXocide
Here's the actual filing:
[https://www.sec.gov/litigation/complaints/2018/comp-
pr2018-2...](https://www.sec.gov/litigation/complaints/2018/comp-
pr2018-219.pdf)

------
jmachete
Musk is Tesla, and people loves Musk whatever he do. The same way a couple
years ago, the Apple Board pulled out Steve Jobs from his company, they are
now trying to do the same with Musk on Tesla. BAD Move. Tesla without Musk is
nothing

------
artemisyna
I just hope Musk doesn't end up suiciding cause of all of this. =/

------
qj4714
To me it’s weird because when I heard the news I assumed he was full of shit.
And the market realized pretty quickly as well. Wished I had shorted the
stock...

------
briatx
Lawsuit secured.

------
gfody
the actual filing is more interesting:
[https://cdn.pacermonitor.com/pdfserver/3KSLKOY/96034763/Unit...](https://cdn.pacermonitor.com/pdfserver/3KSLKOY/96034763/United_States_Securities_and_Exchange_v_Musk__nysdce-18-08865__0001.0.pdf)

------
nebulous1
For a genius he's a bit of a moron

~~~
deckar01
Unless he's an evil genius. There are financial advantages to tanking the
value of your stock in the short term, especially if your primary goal is to
increase your ownership in the company. I believe on more than one occasion he
has made controversial statements which tanked the price, then purchased
millions worth of shares to "inspire confidence".

------
caublestone
Is there any logic in forcing the share price down in order to make a go
private deal possible?

------
kbos87
Wealthy narcissistic attention seekers should be subject to the law just like
the rest of us.

------
jbeales
So if he's banned from running a public company, could he... take Tesla
private?

------
memmcgee
All I can say is that the Star Trek: Discovery name drop will age extremely
poorly.

------
gfody
does the SEC have a case? Elon can say the post was a joke (probably the
truth), or that he sincerely intended to take the company private at $420
after smoking a joint with a potential backer but then later thought better of
it, say he even confessed that his tweet was a deliberate attempt to mislead
short-sited investors in a lapse of moral judgement; it would still be just a
note on a social network, not an official company announcement. what if he
left his phone unattended and someone made that tweet, would the SEC be suing
him for negligently managing his twitter stream? isn't the real problem that
too many "investors" are making short-sited decisions based on nonsense posted
to social networks?

~~~
detaro
from the filing:

> _In November 5, 2013, Tesla publicly filed a Form 8-K with the Commission
> stating that it intended to use Musk’s Twitter account as a means of
> announcing material information to the public about Tesla and its products
> and services and has encouraged investors to review the information about
> Tesla published by Musk via his Twitter account._

------
foobarbazetc
Life lesson: never tweet.

------
newnewpdro
The day Elon Musk ceases being CEO of Tesla is when I'll buy TSLA. Until then,
it's too much of a volatile shit show with his unpredictable behavior too
closely resembling that of the 45th president of the United States.

------
tinkerteller
TLDR; According to article, SEC did do the "swift" investigation and it seems
they were convinced Musk had no hard evidence to back up his $420 claim. They
even drafted settlement agreement that was supposed to be signed which I'm
guessing involved removing Musk from exec position. However at last minute
Musk's lawyers decided not to go for settlement and now they are going to
fight the case. I'm thinking they probably cooked something with Saudi to
corroborate the claims - may be in exchange for some future deal. For whatever
reason, Musk lawyers have figured things out so at this point Tesla is buy for
me.

------
NN88
The good thing is that none of his companies are named after himself...

------
andromaton
Musk did not want to quit Tesla, but wanted out: tweetice.

------
detaro
this thread seems to have "won":
[https://news.ycombinator.com/item?id=18088118](https://news.ycombinator.com/item?id=18088118)

~~~
sctb
It did! But it seems fair to go with the earlier submission, so we did.

------
gammateam
YESSSSSSSS

sic em boys

Now my opinion will be supported by the full faith and credit of the United
States of America

Gamma team activated. Its an options reference. Its always been about the
Greeks.

------
NN88
Twitter is like keeping a loaded gun in the house with kids.

Politicians, Business leaders, community influencers...

BEWARE

~~~
ravenstine
(removed)

~~~
jeromegv
This isn't really the context here. It's a tweet from 10 years ago. He wrote a
tweet, lying about having secured funding to take Tesla private, even giving
the weird price of $420. His tweet was not taken out of context or
misconstructed, he did this tweet very willingly and this tweet meant exactly
what he wanted it to say.

~~~
ravenstine
Oh yes, you're correct, and sometimes I go on a tangent and leave comments
that aren't in the exact same context from when I first started thinking. :)

------
thrillgore
The Neon Neon album about Musk is going to be straight fire.

------
tw1010
Imagine if he knew this would happen, and the reason he went on rogan was a
strategic play to win public favour. (I mean I love Elon, but it's not totally
improbable.)

~~~
jacquesm
If this is your idea of winning public favor then you suck at strategy :)

------
andreygrehov
> “In truth and in fact, Musk had not even discussed, much less confirmed, key
> deal terms, including price, with any potential funding source,”

Interesting. How do they know? Did someone from SEC called Musk and he said:
"Nah, we're just in talks with investors, nothing lined up yet".

~~~
ninjaranter
Close enough, he blogged about it [https://www.tesla.com/blog/staying-
public](https://www.tesla.com/blog/staying-public)

~~~
andreygrehov
Ah, gotcha. Thanks a lot for the link.

------
fipple
The proposed punishment is statutorily allowed for the infraction. Sadly, in
this climate, it's not clear whether this is standard operating procedure for
this, though, or whether a particularly vindictive response because of some
political slight Musk may have committed towards the administration or the
SEC.

------
objektif
It is really sad to see this happening to Elon. He is one the handful of
visionaries who wants to change the world for the better. He could have easily
choosen to sell our private information for adds but he went for reducing our
dependence on fossil fuels. And then he sends an idiotic tweet in the middle
of the day. Such a shame!!!

~~~
kraftman
Not just one idiotic tweet.

------
crb002
He could offer to sell his personal shares for $420 a pop. SEC would have no
case, Elon gets more $$ to put into Boring. Win win.

------
wil_I_am_27
Most of the executives are gone. And the ones that remain are getting sued.
Tough times for Tesla.

------
Arzh
What if it was true, what if he was working with a group to secure funding to
take the company private? Would that make the claim that he was 'deceiving'
the investors invalid? I don't really know anything about this kinda thing but
I would think if he was just saying that he was working towards that goal but
deiced not to do it wouldn't be 'deceiving.'

~~~
rchaud
When I'm making a deal, I usually keep my mouth shut about it until every
document that needs to be signed, has been signed. The Musk worship on here
and the Internet in general has for too long overlooked his impulsive
behaviour in the capacity of his CEO role.

~~~
Arzh
I don't find impulsiveness to bar someone from being am effective CEO (though
I might not invest in that company). I was looking for a more reasoned answer
around if it would still be illegal to say what he did if he actually had the
backing he was alluding to. The answer that jonknee gave shows that my
question is not the case in this instance but it was a more hypothetical.

------
instaheat
....well, fuck. I had hoped like any of us rooting for Elon Inc. that this
wouldn't happen. I truly hope it amounts to a slap on the wrist because I want
Tesla to succeed.

I'll show my support with my wallet as soon as I am able.

~~~
enraged_camel
Elon's judgment has been compromised by intense stress combined by lack of
sleep and he is now a detriment to Tesla. For the past several months he has
been a complete PR disaster. If you want Tesla to succeed as I do, you should
support his ouster.

If Tesla can't survive without Elon, then maybe it doesn't deserve to. A
single point of failure that is one person is not a sustainable business.

------
Latteland
The suit asks to prevent Musk from being an officer of a public company. That
would be a very severe punishment for him. So the way to deal with that is to
take Tesla private.

Problem solved!

------
agumonkey
This is his Pepsi moment. Ousted from Tesla, will have to hang low and learn
more, and will buy back Tesla (with the help of William Gates)

------
colordrops
Something's not right in the US when one of the world's top innovators and
fighters for renewable energy is toppled by a tired tweet, and the
unaccomplished sexual molester of a leader of the US says many far worst
things on nearly a daily basis for years and gets away with it.

~~~
SteveNuts
You have to be extremely careful with your public statements when you run a
publicly traded company. Full stop.

~~~
colordrops
I get that, hence my statement. I don't think it should be the case.

------
mschuster91
Probably he's gonna draw out an email by the Saudi or some other state fund
declaring they're willing to take over enough Tesla stocks for effectively
taking Tesla private (gotta leave some stock for Musk and employees, I guess).

For what it's worth I actually expect something alike this, the Saudi (and
other Arabian) states are trying to convert their monies into something that
does _not_ depend on oil since years. Tesla and every other car company with a
decent EV portfolio are and will be perfect targets for that strategy.

------
jjdag
While there isn't much doubt that Musk is at fault here, I wonder how a
business owner should react when perceiving that his company is threatened by
some journalists and (social) media influencers who seemingly have ties with
short sellers. I understand that shorting helps stabilize markets but in this
case with Tesla being the most shorted stock it seems that forces were at work
to stain the company's reputation in order in order to prevent important
losses. Seems unethical to me as well, but maybe I am being very naive here.

~~~
romed
If a CEO of a publicly traded company expresses a belief in a short-
side/journalism conspiracy, the board of that company should relieve that
person of their duties right away. All such people in recent history have been
paranoid cranks who drove their companies into the ground. See: Overstock

As for Tesla specifically, there is an overt and massive "conspiracy" on the
part of the long side to cheer their share price. There are numerous online
news outlets that are shameless boosters of Tesla. The idea that there's a big
conspiracy between short sellers and journalists has no supporting evidence
whatsoever.

------
stevew20
Musk being banned from serving as an officer or director of a public
company... Does anyone else see this as the beginning to the rise of a super
villain?

Think about it: our insanely legislated government decides that a rich and
accomplished engineer/businessman can no longer run his businesses? He would
totally turn evil, buy an island, and start building his super lair!

------
burke
On one hand, the $420 tweet was just blatantly obviously a bad idea and he
should have known better.

On the other hand, it feels... strange somehow that a joke (if a slightly
deadpan one) has consequences this severe. It affected the markets and it
obviously wasn't without real-world consequences in any case, but something
about this all just feels a little off somehow.

~~~
bufferoverflow
I wonder if they will be able to demonstrate that any damage was actually
done. The $420 tweet had a reverse effect in the end, not what most people
would expect from such a tweet.

~~~
mikestew
If I, a not-inexperienced investor, briefly wondered if I should by a few more
lots of TSLA based on the tweet, it is not unfathomable that someone actually
clicked the “buy” button somewhere near the peak. In short, yeah, it would be
trivial to demonstrate damage. _Someone_ was buying those pricey shares before
the drop.

EDIT: down $31 in after hours, hell, _I’m_ thinking about suing. :-P

~~~
mrep
Same. I thought there was no way he say such a stupid thing as "funding
secured" without haven't it locked down precisely because I thought the SEC
would easily come after him if he lied about it.

Fortunately, my brother talked me out of it but I was seriously considering
buying some.

~~~
mikestew
_because I thought the SEC would easily come after him if he lied about it_

Which is exactly it. Folks here and elsewhere refer to it as "...obviously a
joke". No, it's not so obvious, because if you joke about such things _the SEC
will nail your ass to the wall_. And hence my consideration of purchase. Were
the SEC _not_ to follow through, well, what are they going to say when the
next joker says, "j/k"?

And so, apologists and Musk themselves are about to find out that they're
fucking serious when they tell you not to make bomb jokes in the airport
security line. And when your antics take 10% off your share price in one day,
Musk'll start to lose some fans even, because this shareholder sure isn't the
Musk fan he once was.

~~~
jacquesm
For me the turning point was when he joked Tesla was going bankrupt. It showed
a complete misunderstanding of the role of the CEO in a public company as
opposed to the CEO of a private company. You live in a glass house, that means
you move with care and don't throw bricks around.

------
zekevermillion
The subtext is that Elon intentionally bumped the stock price to screw over
short sellers like Jim Chanos. But the rationale behind 10b5 is to protect
_investors_ from fraud. Right, we are not concerned with protecting short-
sellers who spend _all day_ on twitter making up negative stories about their
targets. So the underlying rationale here has to be that Elon's $420 tweet
harmed regular investors who purchased TSLA at inflated prices during the time
between his initial tweet and the announcement that there would be no go-
private transaction.

The irony of SEC enforcement power is that the harsher they come down on the
company or its execs, the more damage they do to the very investors they are
charged with protecting. And I tihnk that is why you often see relatively
modest settlements. Ya know, unless the board of Tesla is tired of Elon, I
think there is a decent chance they are able to reach a settlement where Elon
is not barred from serving as an officer or director.

~~~
_drimzy
> Right, we are not concerned with protecting short-sellers who spend all day
> on twitter making up negative stories about their targets.

This doesn't make sense. We don't go after them because they don't have any
authoritative powers/inside knowledge about the company, so a reader cannot be
misled by them. If an exec of a company short sells a huge chunk of the
company and plants a misleading negative story about the company, SEC will go
after them too.

~~~
zekevermillion
What I mean is, we are concerned with price manipulation. But the theoretical
harm of price manipulation is that some investor has overpaid based on the
intentionally misleading $420 tweet. The SEC is not primarily trying to
protect Jim Chanos from getting screwed on his short position. It is trying to
protect the "investing public" more generally. When they talk about damages
it's not going to be damages suffered by the shorts. It will be damages
suffered by investors who overpaid based on $420 expectation.

Note that you are actually wrong about 10b5 here, Jim Chanos can very well
commit a 10b5 violation without being an insider. Securities fraud does not
depend on fiduciary status of the perpetrator, and while insider trading is
fraud, there are many other types of fraud as well.

edit: Jim Chanos is too smart to commit a 10b5 violation. I am just using him
as a hypothetical example!

~~~
rohit2412
Price manipulation hurts short sellers by causing "short burn of the century"

~~~
zekevermillion
Yeah, and I believe some of the shorts may have cause to sue (or have
already?) directly. But I tend to think the SEC's focus as to damages is not
going to be that Elon screwed the shorts. It's going to be that some people
bought shares of Tesla at too high a price. I could be wrong, maybe this is
more of a general "integrity of markets" kind of thing, and the SEC doesn't
care about direct harm at all, they just want to deter other aspiring short
slayers out there.

~~~
_drimzy
Yeah I would be surprised if SEC treats short-sellers as different from
investors. The general tone you are maintaining is short sellers are some sort
of abominable gamblers who thrive on failures of other investors. Uh, no. A
short seller is just another investor investing using the tools the market
provides.

~~~
rohit2412
Exactly. I find it hilarious that some people think that SEC should make sure
that a certain category of investors be in profit.

Nopes, SEC makes sure that laws and regulations are followed. Investigations
in Enron also led to people losing money.

~~~
zekevermillion
Unfortunately your notion of the SEC as neutral referee for a fair market is
not reality. The SEC lacks the resources to enforce the law consistently even
within a narrow mandate. Its approach is to target specific violators as a
deterrant and/or to make known what it considers to be the proper
interpretation of securities laws. Some people consider this to be a major
defect in US securities enforcement regime and suggest that the SEC should be
resourced appropriately to the immense task. Personally I have no idea what
they would need to more systematically pursue violators, but wild guess would
be a couple orders of magnitude more funding and personnel.

In the realm of securities fraud, I would say that the private securities bar
does about 90% of the impact (in terms of judgments and settlements). And
successful criminal referrals a la Enron are quite rare, proportional to the
actual amount of fraud going on.

By the way, Enron was a fraud against its own investors. Enron was not about
fraud against short-sellers, it was fraud against purchasers of Enron stock.
Not that short-sellers don't deserve honesty, just saying that they do not
typically receive much love from regulators. From what I can tell, it seems
this is not solely due to the disposition of said regulators, but also because
of legal uncertainty around short-sellers' rights under securities laws.

