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SEC asks judge to hold Elon in contempt

SEC asks judge to hold Elon in contempt

Well this sucks. The SEC wants Elon held in contempt of court after his Feb 19th tweet that said he expected Tesla to produce 500,000 cars this year.

https://www.cnbc.com/2019/02/25/tesla-shares-fall-on-report-sec-asks-jud...

rxlawdude | February 25, 2019

Yep. $11/share hit after hours.

Tomorrow may be ugly.

DanFoster1 | February 25, 2019

If the SEC exists to protect investors from market manipulators, the SEC should go after Consumer Reports.

PBEndo | February 26, 2019

I wonder if Elon had not sent the second correction tweet if the SEC would have any issue here. At the least they would have to wait until the end of the year to see if the original tweet was misleading.

p.c.mcavoy | February 26, 2019

It looks like the bigger issue is whether he is complying with the requirement to get his comments approved by an internal oversight group prior to making them. That's what I see that suggests he could be exposed.

It also may be totally coincidental, but it's also a bit of an eyebrow raiser that Tesla's general counsel and head of legal resigned the day after his first tweet. Gives the impression that potentially some inside turmoil on how Tesla needs to be approaching things like this.

inconel | February 26, 2019

he needs to get his tweets vetted for material information. Was this tweet material, did it move market?

Sam_S | February 26, 2019

It’s an open and shut case with serious consequences. Either Elon can verify someone vetted his incorrect tweet prior to his sending it or he can’t.

kerryglittle | February 26, 2019

Elon says he hates being bi polar. Its awesome. :-/

Boonedocks | February 26, 2019

Really do enjoy the way Elon continues his:

https://twitter.com/elonmusk/status/1093425726139772929

and

https://youtu.be/KjKhbg5rIew

yet neither of our cars have an update since 2018.50

I don't really care about Elon's tweets about car production numbers but I do care when he tweets "coming next week" and what he really means is "Maybe 3 cars - 6 definitely will get it next week" smh smh smh

ktslab | February 26, 2019

"It also may be totally coincidental, but it's also a bit of an eyebrow raiser that Tesla's general counsel and head of legal resigned the day after his first tweet. "

The very first thing I was thinking when I heard the news. Give the tweet a break, come on, what does it do? focus on the company.

should we look for an opportunity to buy more Tesla Stock and sell quickly? I did last time, lol.

TeslaTap.com | February 26, 2019

Perhaps SEC should investigate itself for stock manipulation. They seem to have a larger effect than any tweet Elon has made.

ktslab | February 26, 2019

TT, are you saying SEC should just let Elon tweet whatever he wants? I treat this as slef-inflicted damage if any.

rxlawdude | February 26, 2019

The good news is the market sees this as a ho-hum, given the total shrug to the after hours hit and being net positive today.

SO | February 26, 2019

@ktslab - did anyone say that the SEC should let Elon do whatever he wants? No.....

But what the SEC is doing here is absolute BS. They can let all the banks off the hook for the 2008 mess but yet go after Elon over a tweet that repeats what’s already been disclosed? Please. It’s time the SEC gets their own balls kicked..... Hard. And I mean REALLY hard.

But.... I’m not counting on actual “justice”. Either way, it’s been interesting.

Sam_S | February 26, 2019

Here comes the whataboutism. :(

dougk71 | February 26, 2019

Lets hope this isn't just about SEC power. The tweet was clarified within 15 minutes and it occurred after market hours. Sure Elon stepped on the line but never crossed it by much. Heads of Ford and GM over estimate prospective cars sales all the time and often get it really wrong. Here Elon is nearly accurate but didn't get approval as he said he would. His punishment ought to be giving a free ride in the 500,00thTesla produced to the SEC board.

Haggy | March 2, 2019

I thought that the terms said that if he's in contempt, he could be fined $1000 per day until he's in compliance. Am I remembering that wrong? If that's the case or not, and Elon gets fined, it shouldn't affect the stock price. If Tesla pays the fine, it shouldn't affect the stock price. If the SEC fines Tesla $10 million dollars (assuming that this isn't as bad as "funding secured" and is seen as imprecise rather than an attempt to mislead, since he was talking throughput rate rather than volume) then given the number of shares outstanding, a one dollar change would be an overreaction.

No matter what happens, once this is cleared up we should see a jump in price.

Mark K | March 2, 2019

The SEC order Elon agreed to has two requirements for warranting a penalty -

1. The information Elon released must be material new information

2. Elon did not clear the information with a /board review prior to release.

Legally, both tests must be met to incur a penalty.

#2 was met, and is not in dispute. Elon acknowledged there was no prior review.

But #1 was not met. The information was consistent with the material information disclosed on the earnings call.

The SEC was not equitable in their request for a contempt of court finding. This is clearly reflected in the lack of movement in the stock after each of Elon’s tweets, vs. the massive change in the stock on the SEC statement.

I would be very surprised if the judge finds for the SEC. The court will apply both tests 1 and 2 for their finding, and #1 was not met.

That said, the reason for the hair trigger is likely Elon’s public acknowledgement of his doubts about the equitability of SEC administration, as on 60 minutes.

Conversely, the fact that they pulled the trigger so abruptly, is an existence proof that Elon was right. There is manifest inequity in their actions.

The SEC handed $40 million from Tesla to short sellers. Yet the SEC has taken no action against false and derogatory statements precisely aimed at reducing the share price for their profit.

There is clear bias going on, and Elon has principle on his side in confronting this.

Elon has a fiducuart duty to protect shareholder value, and I think he pretty selflessly defends it. Short sellers on the other hand, are specifically trying to damage shareholder value, yet no action is taken against them by the SEC.

If you were a large short seller, and you had some indirect influence with the SEC, you could have made over $100 million in a few hours, just by virtue of the SEC scare, even if eventually found nonmeritorious.

This is simply too charged of a situation, and after the hearing result, there should be an investigation into how the SEC reached its decision, and who spoke with them. This should include subpoenaing phone records of key SEC decision makers.

Elon must follow the law, but the SEC must follow it too.

Mark K | March 2, 2019

Fudicary

Mark K | March 2, 2019

Fiduciary - (amazing willful autocomplete bot)

NKYTA | March 2, 2019

+42 Mark

The autocorrect in my brian handled all three versions, thank you very much. ;-)

Bighorn | March 3, 2019

Who’s Brian?

SO | March 3, 2019

@Mark K - EXACTLY!

@Sam_S - I’m not saying Elon should get away with something just because the SEC was “questionable” in 2008. I’m saying the SEC needs to be fairly applying their own rules. Sad that you equate this to “Whataboutism”.

Mark K | March 3, 2019

The SEC’s primary enforcement mechanism is filing a civil suit, or a criminal complaint that would be pursued by law enforcement.

Here, a civil suit by the SEC prompted the voluntary settlement contract with Elon/Tesla. No criminal complaint was ever filed, or warranted.

Criminal complaint for inisider trading is what sent Martha Stewart to prison, after the FBI investigated.

Here, the SEC alleges Elon breeched their mutually agreed civil contract.

Whether any outside influence affected SEC advocacy for its job would be a potential criminal matter. It would be investigated by the FBI at the behest of the DOJ.

In honor of RFK, a prior attorney general, inscribed in stone in the DOJ offices is this motto -

“The United States Wins its Point Whenever Justice is Done its Citizens in the Courts.”

Elon Musk is a US Citizen. The SEC is not a Citizen, it’s a government office.

The DOJ and the Judiciary have a duty to protect each citizen, which purpose rises to a higher duty than protecting the government itself.

That’s the beauty of consitutional democracy.

If the SEC system had an instance of being corrupted by financial traders, it would be something the DOJ would pursue and remedy.

Silver2K | March 3, 2019

Maybe NWA can make a comeback and make a song about the SEC

SbMD | March 3, 2019

EM didn't say anything that hadn't already been disclosed. The information was in the earnings transcript, which projected between 350-500k vehicles. Within bounds of the approved release. That's why there was no stock movement around EM's tweet... no news that hadn't already been priced in. This won't be found in favor of SEC. The negative effect of the SEC's inappropriate action on Tesla stock will not play well with any judge.

A waste of taxpayer money to go after EM, frankly.

Mark K | March 3, 2019

DOJ should find out who made (likely via proxy agents) big short trades - after Elon’s tweets, and before SEC announced.

The trail leads somewhere of interest.

You see the rats when the lights go on unexpectedly.

Mark K | March 3, 2019

Any society that makes failure more profitable than achievement will have a lot of failure.

Can anyone here cite a case where the SEC disciplined a Tesla short seller?

Yet haven’t we all seen derogatory headlines about Tesla that turned to be false or heavily tilted?

Mathew98 | March 3, 2019

Chanos and his fellow shorts regularly appear in CNBC/faux news with blatant lies. Why haven't they ever been investigated for spreading FUD and stock manipulations?

Inrush | March 3, 2019

Take a guess. Elon is a force, one that will take money away from a lot of people simply by making life better. They will kick and scream, and try all sorts of things. They will still lose.

Bighorn | March 4, 2019

Bots gone wild

barrykmd | March 4, 2019

BH - is that a new Spring Break movie?