Musk’s Tesla Fun Does Not Amuse SEC(bloomberg.com)
bloomberg.com
Musk’s Tesla Fun Does Not Amuse SEC
https://www.bloomberg.com/view/articles/2018-09-28/musk-s-tesla-fun-does-not-amuse-sec
24 comments
While I agree with this (the SEC filing is very straightforward to read), I think the author of this piece does add a lot, especially being more familiar with how the SEC works. The details around the settlement that Musk backed out of I think is very important, because it does set the stage then that the harshest penalties (officer and director ban) do seem oriented more toward getting Musk to settle than actually banning him.
The complaint of one party in a lawsuit is not the best primary source. The whole purpose of it is leaving you with the impression that the defendant brazenly committed all the charges.
[deleted]
'Alright so here’s the gameplan:
1. Elon removed as CEO by SEC order - can’t be CEO of a public company
2. Tesla stock drops 50%
3. Tesla stock becomes so cheap they take it private
4. Musk reinstated as CEO'
https://twitter.com/AustenAllred/status/1045554529914089472
1. Elon removed as CEO by SEC order - can’t be CEO of a public company
2. Tesla stock drops 50%
3. Tesla stock becomes so cheap they take it private
4. Musk reinstated as CEO'
https://twitter.com/AustenAllred/status/1045554529914089472
I am inclined to believe that he was just putting the '420' number with a dollar sign in front of it just to amuse his girlfriend, as per the BBC reporting.
Motivation is not in the sensible world, there is no gameplan beyond impressing the lady. There is a rich tradition of this in Silicon Valley. Whole companies are built just to impress a lady.
Motivation is not in the sensible world, there is no gameplan beyond impressing the lady. There is a rich tradition of this in Silicon Valley. Whole companies are built just to impress a lady.
The infantilization of tech CEO culture could at least be explained by the ubiqiuity of college-aged founders. And yet I can't think of a single one that did something so obviously ill-advised, and tried to play it off as "it was just a joke bro".
For a frame of reference, look at the difference in Zuckerberg's public statements as CEO today vs those he made as an obnoxious techbro CEO at age 20.
Musk is close to 50 years old. Are we to believe a man of his age thinks a 420 reference would make his 30yo girlfriend laugh?
For a frame of reference, look at the difference in Zuckerberg's public statements as CEO today vs those he made as an obnoxious techbro CEO at age 20.
Musk is close to 50 years old. Are we to believe a man of his age thinks a 420 reference would make his 30yo girlfriend laugh?
50 years old is mid-life crisis time. If his girlfriend has already seen enough of capitalism then upsetting wall Street might just be a naughty thing to make her laugh, if wrapped up in a 420 reference, worth it for two minutes even if costing billions. These things happen when mid-life crisis strikes some people.
People in their twenties that get thrust into the limelight generally do defer to some more sensible babysitting advisers, as per the Google deal with Schmidt. The handcuffs are on as far as money and share valuations go with the junior crowd. It is the 'responsible 50 year old adults' you need to worry about.
People in their twenties that get thrust into the limelight generally do defer to some more sensible babysitting advisers, as per the Google deal with Schmidt. The handcuffs are on as far as money and share valuations go with the junior crowd. It is the 'responsible 50 year old adults' you need to worry about.
HN never fails to disappoint. Anything to hate on Musk, including accusing him of building multiple tremendously successful companies just to appease his girlfriend. Clearly a substantiated opinion.
One defense might be the admit fault apologize beg forgiveness route. I was working to get funding, was too optimistic, accidentally used some poor phrasing in announcing my plans, etc. we've hired a new compliance officer to review future communications for misleading statements.
Another strategy would be to lean over the desk, pluck a quarter from behind the ear of the SEC investigator, slam it on the desk, and announce "see that, muppet? I do that 100 billion more times and I've got all the funding I need."
Choices, choices.
Another strategy would be to lean over the desk, pluck a quarter from behind the ear of the SEC investigator, slam it on the desk, and announce "see that, muppet? I do that 100 billion more times and I've got all the funding I need."
Choices, choices.
It’s very hard to read these articles when dynamic ads are injected and then removed 30 secs later causing me to lose my place. Terrible.
Could Musk just get this over with and pay back whomever lost money on this? It might be worth it for him to keep his position.
Edit: Ouch, I was only halfway through the article when I wrote this, but just noticed it was mentioned after.
Edit: Ouch, I was only halfway through the article when I wrote this, but just noticed it was mentioned after.
He reportedly tore up a settlement at the last moment. Fireworks!
The settlement required him to step down as chairman for two years and let someone else run the company.
Isn't the chairman position just part of the board of directors? I think he would have still been CEO with the agreement. If the SEC wins now, he won't be able to serve as CEO.
No. Chairman of the board only runs the board of directors.
The settlement would have allowed Musk to remain CEO (in charge of the company). The board of directors is in charge of the CEO... and Musk would have been allowed to remain a director (just not the leader / chairman of the directors).
It was a super-lenient deal. I'm surprised Musk rejected it. True, the SEC was forcing Musk to take on 2-new board members, but Musk still has all of his old buddies on the board and would have likely remained in severe control of the company.
Note that as the biggest shareholder, Musk also has the ability to vote on who comes and goes on the board-of-directors, and thus he'd be able to effectively choose the chair as well !! So Musk ultimately would have STILL remained in charge of the company by a severe margin.
Musk is a big shareholder, is on the board of directors, AND is the CEO. He's the fox guarding the hen-house. Completely legal because companies can operate however they want... but SEC was trying to get the board of directors to at least look like they were somewhat independent. I mean, it probably would have been good for Tesla to get a more independent looking board...
The settlement would have allowed Musk to remain CEO (in charge of the company). The board of directors is in charge of the CEO... and Musk would have been allowed to remain a director (just not the leader / chairman of the directors).
It was a super-lenient deal. I'm surprised Musk rejected it. True, the SEC was forcing Musk to take on 2-new board members, but Musk still has all of his old buddies on the board and would have likely remained in severe control of the company.
Note that as the biggest shareholder, Musk also has the ability to vote on who comes and goes on the board-of-directors, and thus he'd be able to effectively choose the chair as well !! So Musk ultimately would have STILL remained in charge of the company by a severe margin.
Musk is a big shareholder, is on the board of directors, AND is the CEO. He's the fox guarding the hen-house. Completely legal because companies can operate however they want... but SEC was trying to get the board of directors to at least look like they were somewhat independent. I mean, it probably would have been good for Tesla to get a more independent looking board...
Having the SEC file against you is far, far worse.
[deleted]
How would a cash settlement meaningfully further the SEC's goal of protecting investors?
No actions by the SEC meaningfully furthers their goal of protecting investors. They extract a fine, the party in question doesn't need to admit guilt, and the cycle continues. Occasionally, they send someone to jail to prove a point (Martin Shkreli), but out of their limited enforcement actions, it is rare.
https://www.dandodiary.com/2018/05/articles/regulatory-enfor... (SEC Public Company Enforcement Action Continue Steep Decline in First Half FY 2018)
> According to the report, the SEC filed 15 new enforcement actions against public companies and their subsidiaries in the first half of FY 2018, representing a 67 percent decline from the 45 enforcement actions the SEC filed in the first half of FY 2017. The number of enforcement actions filed in the first half of 2018 is significantly below the average of 29 enforcement actions filed per half year during the period FY 2010 through FY 2017, and below the median of 26 actions per half year filed during that same time period. The 15 enforcement actions filed against public companies and their subsidiaries in the first half of 2018 is the lowest half year filing total since the first half of FY 2013, when there were 12 filings.
> The current trend toward significantly reduced numbers of enforcement actions against public companies and their subsidiaries began in the second half of 2017. In the last half of the 2017 fiscal year, the SEC filed only 17 enforcement actions against public companies and their subsidiaries, compared to 45 actions filed in the first half of FY 2017.
Citigroup fraud cost investors hundred of millions of dollars. The SEC fined them $10 million. The SEC seems...less than effective in encouraging above board behavior by public companies. The fine is simply a cost of doing business.
https://www.sec.gov/news/press-release/2018-155-0 (Citigroup to Pay More Than $10 Million for Books and Records Violations and Inadequate Controls)
> The Securities and Exchange Commission today announced that Citigroup has agreed to pay $10.5 million in penalties to settle two enforcement actions involving its books and records, internal accounting controls, and trader supervision. The charges stem from $81 million of losses due to trader mismarking and unauthorized proprietary trading and $475 million of losses due to fraudulently-induced loans made by a Mexican subsidiary.
https://www.dandodiary.com/2018/05/articles/regulatory-enfor... (SEC Public Company Enforcement Action Continue Steep Decline in First Half FY 2018)
> According to the report, the SEC filed 15 new enforcement actions against public companies and their subsidiaries in the first half of FY 2018, representing a 67 percent decline from the 45 enforcement actions the SEC filed in the first half of FY 2017. The number of enforcement actions filed in the first half of 2018 is significantly below the average of 29 enforcement actions filed per half year during the period FY 2010 through FY 2017, and below the median of 26 actions per half year filed during that same time period. The 15 enforcement actions filed against public companies and their subsidiaries in the first half of 2018 is the lowest half year filing total since the first half of FY 2013, when there were 12 filings.
> The current trend toward significantly reduced numbers of enforcement actions against public companies and their subsidiaries began in the second half of 2017. In the last half of the 2017 fiscal year, the SEC filed only 17 enforcement actions against public companies and their subsidiaries, compared to 45 actions filed in the first half of FY 2017.
Citigroup fraud cost investors hundred of millions of dollars. The SEC fined them $10 million. The SEC seems...less than effective in encouraging above board behavior by public companies. The fine is simply a cost of doing business.
https://www.sec.gov/news/press-release/2018-155-0 (Citigroup to Pay More Than $10 Million for Books and Records Violations and Inadequate Controls)
> The Securities and Exchange Commission today announced that Citigroup has agreed to pay $10.5 million in penalties to settle two enforcement actions involving its books and records, internal accounting controls, and trader supervision. The charges stem from $81 million of losses due to trader mismarking and unauthorized proprietary trading and $475 million of losses due to fraudulently-induced loans made by a Mexican subsidiary.
The SEC isn't the DOJ. They can't enforce criminal penalties. Their agency is pretty restricted in what they're allowed to do; the strictest penalties they're allowed to enforce include barring people from:
* Managing securities
* Being on the board of directors of a public company
* Being an executive of a public company
If your complaint is that people don't feel enough pain from their actions, blame the DOJ not the SEC.
> Occasionally, they send someone to jail to prove a point (Martin Shkreli)
To reiterate, Martin Shkreli was charged by the DOJ, not the SEC.
* Managing securities
* Being on the board of directors of a public company
* Being an executive of a public company
If your complaint is that people don't feel enough pain from their actions, blame the DOJ not the SEC.
> Occasionally, they send someone to jail to prove a point (Martin Shkreli)
To reiterate, Martin Shkreli was charged by the DOJ, not the SEC.
My point was that the SEC either doesn't have the teeth or doesn't care to have any meaningful impact in protecting investors, and I think I proved that point based on their enforcement statistic. "Stop! Or I'll take a bit of change from your pocket and say stop again!"
Your point about Shkreli is taken. I agree he committed a crime, I disagree it deserved prison time.
Your point about Shkreli is taken. I agree he committed a crime, I disagree it deserved prison time.
I guess, I feel like all you've shown is that the SEC's teeth have been filed down the past couple years.
That makes sense to me given the current administration's overall stance towards regulation and enforcement. It's well in line with other enforcement agencies similarly being neutered under the current administration, and doesn't necessarily portend anything for the future (EDIT: Beyond the next two years, obviously).
That makes sense to me given the current administration's overall stance towards regulation and enforcement. It's well in line with other enforcement agencies similarly being neutered under the current administration, and doesn't necessarily portend anything for the future (EDIT: Beyond the next two years, obviously).
Sure the SEC, does not have broad enforcement powers but most federal agencies don't.
The FBI famously chases down serial murderers, but they can't charge them with crimes either.
Most agencies have a police wing, but like most police, they refer your case to the DA who may charge you.
If Citi isn't charged here, then it's the DOJ at fault. They got the investigation report and chose not to act.
The FBI famously chases down serial murderers, but they can't charge them with crimes either.
Most agencies have a police wing, but like most police, they refer your case to the DA who may charge you.
If Citi isn't charged here, then it's the DOJ at fault. They got the investigation report and chose not to act.
I highly suggest people read the SEC filing for yourself, without bias, if you want to see the SEC's point of view on this.
With that being said, this opinion piece collates a bunch of news that happened yesterday, and can provide context to what is going on. But I still feel like the SEC's filing is the best primary source document to this TSLA news event. Besides, the "meat" of this opinion writer is purely copy/paste quotes from the SEC document.
https://www.sec.gov/litigation/complaints/2018/comp-pr2018-2...