Elon Musk could have avoided SEC lawsuit by signing a no-guilt settlement

Shawn Knight

TechSpot Staff
Staff member

The Securities and Exchange Commission on Thursday filed a lawsuit against Tesla CEO Elon Musk regarding tweets published in August about taking Tesla private. The suit was nearly avoided entirely but Musk reportedly pulled out of a settlement at the last minute.

Sources familiar with the matter tell CNBC that the deal would have allowed Tesla and Musk to pay a nominal fine. Furthermore, Musk would not have had to admit any guilt in the matter.

Musk’s apprehension reportedly came from the fact that the deal would have barred him as chairman for a period of two years. Tesla, meanwhile, would have been required to appoint two new independent directors.

CNBC said Musk refused to sign the deal because “he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that.”

Share value in Tesla is down more than 11.6 percent on the day, trading at $271.75 as of this writing.


Musk, if you recall, teased on Twitter about taking Tesla private in early August. He specifically said he would consider doing so at $420, adding that funding had already been secured.

In its lawsuit, the SEC said Musk “calculated the $420 price per share based on a 20 percent premium over that day’s closing share price because he thought 20 percent was a “standard premium” in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he 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.”

As it stands, Musk’s future with Tesla remains unclear. According to Gene Munster, a managing partner of venture capital firm Loup Ventures, there’s about a 25 percent chance Musk remains Tesla’s CEO.

Lead image via David Paul Morris, Getty Images

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OutlawCecil

TS Evangelist
I don't understand enough about how business works but would love for somebody to explain to me why it's such a bad thing that he said that. How do you get sued for making a statement about the direction of your company?
 
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bmw95

I don't understand enough about how business works but would love for somebody to explain to me why it's such a bad thing that he said that. How do you get sued for making a statement about the direction of your company?
Since he didn't go through with taking the company private, he or his inner circle of friends could have made a lot of money on the market's response if they sold stock. Or for example, he could have a friend of his sell stock who would give him a portion of the profits as a result of the tweet. Technically that's stock manipulation fraud.

To be honest though, I think the status quo are just looking for ways to stop Elon as he's naturally disruptive and doesn't care about the same things those in power do. He's been very far from perfect and I think an investigation was definitely in order, but a request to ban Elon from all c-level positions in any public company speaks for itself.
 

fps4ever

TS Evangelist
The guy is an even bigger egotistical ***** than first thought. A rational smart person could see the writing on the wall.
 
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wiyosaya

TS Evangelist
I don't understand enough about how business works but would love for somebody to explain to me why it's such a bad thing that he said that. How do you get sued for making a statement about the direction of your company?
Since he didn't go through with taking the company private, he or his inner circle of friends could have made a lot of money on the market's response if they sold stock. Or for example, he could have a friend of his sell stock who would give him a portion of the profits as a result of the tweet. Technically that's stock manipulation fraud.

To be honest though, I think the status quo are just looking for ways to stop Elon as he's naturally disruptive and doesn't care about the same things those in power do. He's been very far from perfect and I think an investigation was definitely in order, but a request to ban Elon from all c-level positions in any public company speaks for itself.
I am not a lawyer, however, the fact is that what he tweeted immediately affected stock prices. In the financial world, you just cannot legally do stuff like that unless a deal is already in place. Doing something like that creates a false impression that artificially affects the stock price to the detriment of some, for instance, the short sellers that Musk is known to hate, and is a boon to others, I.e., current shareholders.

http://www.investorwords.com/14083/stock_manipulation.html
https://en.wikipedia.org/wiki/Market_manipulation

The examples at the Wikipedia link do not accurately reflect what Musk did. As I see it, the "stock bashing" scenario is easily flipped around to become a "stock praising" scenario in that Musk was suggesting that there was the possibility of a deal at a specific price when there was no such deal in place, thus artificially inflating Tesla's stock price.
 
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wiyosaya

TS Evangelist
You know, I've been sitting here wracking my brain, trying to figure out what I could possibly add to this discussion...:confused:

And then it hit me ............... "I told you so!"
I was tempted to say that, but I am glad that I left room for you to join the conversation!!!
:laughing:
Your opinion on Musk is always welcome to me!:D
 
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captaincranky

TechSpot Addict
I don't understand enough about how business works but would love for somebody to explain to me why it's such a bad thing that he said that. How do you get sued for making a statement about the direction of your company?
Well, yelling "fire" in a crowded movie theater isn't covered under the 1st amendment's, "right to freedom of speech", since it would cause a panic. If you did it for personal gain, say to collect what valuables people left behind, or simply for personal enjoyment, you would be held criminally liable for, "inciting a riot".

The stock market is hysteria prone as it is. Let's compare a "what if", to something like instigating a feeding frenzy in a school of sharks, in waters where people were swimming. Should one of the bathers be killed, you could conceivable be held liable for voluntary manslaughter. But those are both criminal issues.

But, starting a unfounded rumor that you have a deal in place to sell your company at a price far above it's current price, is the civil equivalent of igniting that feeding frenzy in stock buyers.

Given Tesla's two billion dollar operating loss last year, Musk's rumor can't be anything but an attempt to recover those losses, and take a hefty profit on his own stock, should he have sold any of it at the inflated value. That's insider trading and stock manipulation. It's also illegal, ask Martha Stewart.

Elon Musk is drunk on his own Kool-aid.He's a sociopath on an ego bender, plain and simple. Neither he or Tesla is going to save the planet.

Cumulatively, if the stunt of launching his Tesla into space, then trumping up a fake corporate buyout for Tesla isn't enough to convince you that Musk is a carnival barker and con artist, I suggest you get in touch with people who deprogram cult victims, and ask for their assistance in helping you to denounce Musk as your messiah..

The only thing Musk has really suceceded with is Paypal. What did Paypal really do? It took money from you, and handed it to another party, with Musk's hand in the middle of the till the entire time. He doesn't do anything else in current life.

He isn't going to design an electric powered supersonic aircraft. He's going to claim he can, take money from you, siphon off as much as he wants, and piss away the balance down the drain on a project that is in all likelihood, an impossibility. And you'll be muttering the whole time what a "great man he is", and how he has, "revolutionized the industry".

I hope that helps.
 
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petert

TS Evangelist
Musk big mouth ... and for what? exactly for damn nothing - he just lost it for 5 seconds and went and vent his anger with that tweet ... not the first or the last time
 

petert

TS Evangelist
The only thing Musk has really suceceded with is Paypal. What did Paypal really do? It took money from you, and handed it to another party, with Musk's hand in the middle of the till the entire time. He doesn't do anything else in current life.
Not exactly - when I was a student (2006) I was looking at a fully electric Fiat car, two seats with 20 km autonomy and who would had trouble taking even a modest slope. This car was a highlight of the electric vehicles back then, worthy enough to be mentioned in an Electric Traction course. Fast forward to our days - we have Tesla - they are still not profitable but everyone is taking a shot at ihaving a fully electric car in their product range. Many top manufacturers (Audi, BMW, Nissan, etc) are trying a model at least on the market - China also, many fully electric cars, not to mention electric scooters. Musk and Tesla have driven it, this kind of technology would have not taken off on its own. Not to mention his space company, he is cutting all sorts of corners but also scoring big time.
Musk certainly is not your typical fellow - controversial or mad at best - but trying to diminish his achievements is gross.
 

captaincranky

TechSpot Addict
Not exactly - when I was a student (2006) I was looking at a fully electric Fiat car, two seats with 20 km autonomy and who would had trouble taking even a modest slope. This car was a highlight of the electric vehicles back then, worthy enough to be mentioned in an Electric Traction course. Fast forward to our days - we have Tesla - they are still not profitable but everyone is taking a shot at ihaving a fully electric car in their product range.
Over the last 70 years or so, Fiat hasn't done much anyway. Given its European origins, and the exorbitant price of gasoline in most, if not all, markets, the average workaday car sold by them was a Tinkertoy, compared to America's "gas guzzlers".

When they were first released, "big screen TVs", by Pioneer, Sony, and the like were up to $10,000.00 US. But electronics firms were trying to recoup their R & D costs by finding those, "first kids on the block", who were vain, and stupid eager enough to part with the money to own one. By your own account, this Fiat electric car needed bigger motors and certainly, a far bigger battery. So, unless your name was "Fred Flintstone", you really shouldn't have been impressed with that offering.

So what is a Tesla really? That same Fiat with bigger batteries and motors, nothing more.

Up to this point, a Tesla has been the toy of the idle rich, and a talking point for the "Hollywierd" actors and actresses who want to show just how very concerned they are for the environment, for publicity's sake. Something to divert attention away from their otherwise extravagant and in many cases cocaine fueled life styles.

Many top manufacturers (Audi, BMW, Nissan, etc) are trying a model at least on the market - China also, many fully electric cars, not to mention electric scooters. Musk and Tesla have driven it, this kind of technology would have not taken off on its own.
Actually not so much. If Victor Hugo was correct in this assumption:

"Armies cannot stop an idea whose time has come. No army can stop an idea whose time has come. Nothing is as powerful as an idea whose time has come. There is one thing stronger than all the armies in the world, and that is an idea whose time has come".

Then Musk is just surfing a wave, not creating it.


Not to mention his space company, he is cutting all sorts of corners but also scoring big time.
Musk appropriated all of the technology of the US space program, the power of the current computers involved in fly wire aircraft control, and has sold it as his own accomplishment. His model for progress is, if I can think something up, then you have to be able to build it, while I go run my mouth about what a great innovator and man I am. These are reports which have come from many of his former employees. Other than being a true sociopath, (and this last escapade of attempted stock manipulation is proof in veritas), that he truly believes, what he wants he is entitled to get by any means necessary, others be damned, and he truly doesn't believe he has done anything wrong in the stock swindle


Musk certainly is not your typical fellow - controversial or mad at best - but trying to diminish his achievements is gross.
Musk is a full grown man, living in the imaginary world of a childish brat, who is suffering from ADHD, and the belief he can convince anyone, of anything, he chooses. His expansive megalomania does apparently does give perceived credence to his words and deeds, but only in the minds of those who would also be susceptible to hypnosis.

This is evidenced by the fact that every time he fails to meet a promise he has made, he makes another one as a diversion to cover up the former failure. In less abstract terms, he hasn't been able to deliver the Model 3's he promised, so he starts running his mouth about another model something or other he's going to introduce at his press conference next week.

As for his most recent "space achievement", Space-X wasn't tasked with putting NASA's most recent satellite in orbit, a Lockheed conglomerate was. I wonder if that's partly in response to the half billion dollar surveillance satellite, Space-X managed to dump into the ocean. Although, "Musk's company wasn't responsible for that. Just ask Musk, he'll tell you. (even before he's been asked about it, or studies the results of the investigation).
 
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captaincranky

TechSpot Addict
One could say that about new TVs being the same as old TVs. TVs with bigger screens and less bezel nothing more.,,,[ ]....
Musk had nothing to do with inventing either lithium batteries, modern fly by wire flight controls, (you know, the kind you would need to land a booster rocket), or modern high torque rare earth magnet electric motors.

So, how about if we shelve the cute pie analogs, and give Musk the credit he's due? He invented the bezel to put the new TV parts in.

Or rather her slapped the idea for a Tesla electric car on some employee's desk, and then went on a press junket to brag about it, while completely ignoring his employees role in the process.

I have to go now. Ideas for new posts about Musk come a mile a minute. Me and Musk are a lot alike, in that as fast as an idea balloon forms over his head, I poke holes in them. Although I gotta say, it is tough to keep up with those those thought balloons of his. His mind is an eternally refilling full tank of hot air.

Would you like to book a ticket for the first flight of Musk's electric powered supersonic airliner? He thought of it a few weeks ago, so it'll happen any day now, any day now.
 
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cliffordcooley

TS Redneck
So, how about if we shelve the cute pie analogs, and give Musk the credit he's due? He invented the bezel to put the new TV parts in.
I'm willing to bet there are at least a dozen TV manufacturers, holding that very same position you so blindly put Musk in. So no lets not shelve the cute pie, as if you just "dropped the mic" on me. Let me put it this way. Musk is by far not the only one deserving of your disrespect. Yet he is the one that catches it, by name on every article related to him.

I hate Apple. I hate Google. It is the company I hate. It is the group of people working for the company I have a problem with, not just the one person. People have so much hatred toward the president. One term it is fifty percent. The next term it is the other fifty percent. Meanwhile it is congress we should bolster our anger toward. It is easy to forget who to be angry at, when there is a chosen spokesperson involved.
 

captaincranky

TechSpot Addict
@cliffordcooley Well, I actually did drop the mic on you

And the SEC just dropped the mic on Musk:

https://bgr.com/2018/09/29/elon-musk-lawsuit-sec-settlement-40-million-fine/

Musk draws more attention to himself than any other CEO on the planet. His claims and imaginings are that of an egomaniacal lunatic.

If you've followed my postings, (and doubtless you have), I've held that to be a CEO of a major corporation, requires at least a certain level of sociopathy. Musk is completely over the top in that regard. If Jeff Bezos says he's going to buy a grocery store chain, he follows through and does it. If Musk claims he's going to deliver 6,000 Model 3 cars, consider yourself lucky if you get half that.

I all honestly don't know where you get the idea I think highly of Google, Amazon, Intel, Samsung, or the CEOs of any of them. I don't. Musk is just the one who runs his mouth the most, and in reality has accomplished the least.

You sound like these 20 years olds here. "Musk built the Falcon Heavy for a tenth of what the Saturn 5 cost, and that makes him a great man". What it makes him, is the beneficiary of the billions of dollars of R & D advanced by the US government in furtherance of America's space program.

Colonies on Mars, machines that bore tunnels many times that of current devices, supersonic electric powered aircraft. et aL, ad nauseum, merely sound like the ravings of a teenage boy hopped up on Adderall. Especially when you consider Musk himself can't be held responsible for inventing any of the technology he plagiarizes..

And FWIW, I could care less about your opinion of my opinion of Musk. You just waste a bunch of my time replying to it.

I'll stick by my opinion of Musk, and you do what you feel you need to do. You stand zero chance of changing my mind..

Now, run along, and go back to imploding over your eternal circular conundrum about "when is regulation not regulation, and when is neutrality not neutrality", and so forth.

BTW: Part of Tesla's settlement with the SEC, was that Tesla has to control little Elon's communications.

What that amounts too, in analog, is an officer from animal control telling the owner of a ever yapping little dog, "shut that thing up, or we'll take it off you".
 
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mbrowne5061

TS Evangelist
As for his most recent "space achievement", Space-X wasn't tasked with putting NASA's most recent satellite in orbit, a Lockheed conglomerate was. I wonder if that's partly in response to the half billion dollar surveillance satellite, Space-X managed to dump into the ocean.
Agreed on all point except this one. I keep a pretty close eye on the industry, Zuma was a Northrop Grumman project and the part that failed was their own interface with SpaceX's Falcon rocket. The rocket put the satellite on the correct orbital insertion trajectory, but the satellite failed to dump its interface mechanisms after it separated from the Falcon 9. NASA and the US Govt continues to rely on the ULA because they have demonstrated heavy launch experience, and SpaceX does not.

Personally, I think Musk is a blowhard cut from the same cloth as Trump - albeit from the left side instead of the right, from this particular bolt. They're both egotistical grifters who understand how to use Twitter, how to pass off someone's else's achievements as their own, their failures as someone else's, and not much more than that.
 
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captaincranky

TechSpot Addict
Agreed on all point except this one. I keep a pretty close eye on the industry, Zuma was a Northrop Grumman project and the part that failed was their own interface with SpaceX's Falcon rocket. The rocket put the satellite on the correct orbital insertion trajectory,but the satellite failed to dump its interface mechanisms after it separated from the Falcon 9.
OK, I can't do calculus, and I forget algebra as soon as I walk out of the classroom BUT: If no additional inertia was expected from the interface, then the satellite was going too slow, and the Falcon booster was at fault. If the interface had an additional stage rocket, then Grumman was at fault.

Correct me if I'm wrong, but your explanation should have left the satellite & interface in LEO together. There's no air up there to cause drag.Consequently, with both objects in orbit and separating correctly, by virtue of lost mass, the satellite should have assumed a slightly higher orbit.

I have no idea what of the control jet configuration of the separated package is, was, or how it could have affected the orbit. So obviously, there is still room for doubt in my theory

IMH(math challenged)O, if the satellite was traveling at orbital velocity, then the interface not separating, should have left the satellite in orbit, but crippled, instead of in the Indian Ocean.

Look, Space-X had a Falcon blow up on the pad, and Musk was out the next day claiming someone shot it down. He was out the very next day after this incident, denying any responsibility, before any formal investigation took place. Realistically, it wouldn't take more than 30 MPH or so of miscalculation of the booster's velocity, to cause the result which happened.

And well, if Musk's lips are moving, he's lying, plain and simple.

But then again, I don't know whether Grumman has done all that much since the F-14.:confused:

NASA and the US Govt continues to rely on the ULA because they have demonstrated heavy launch experience, and SpaceX does not.
I think this could just as easily be categorized or defined simply as, "trust"!
 
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mbrowne5061

TS Evangelist
OK, I can't do calculus, and I forget algebra as soon as I walk out of the classroom BUT: If no additional inertia was expected from the interface, then the satellite was going too slow, and the Falcon booster was at fault. If the interface had an additional stage rocket, then Grumman was at fault.

Correct me if I'm wrong, but your explanation should have left the satellite & interface in LEO together. There's no air up there to cause drag.Consequently, with both objects in orbit and separating correctly, by virtue of lost mass, the satellite should have assumed a slightly higher orbit.

I have no idea what of the control jet configuration of the separated package is, was, or how it could have affected the orbit. So obviously, there is still room for doubt in my theory

IMH(math challenged)O, if the satellite was traveling at orbital velocity, then the interface not separating, should have left the satellite in orbit, but crippled, instead of in the Indian Ocean.

Look, Space-X had a Falcon blow up on the pad, and Musk was out the next day claiming someone shot it down. He was out the very next day after this incident, denying any responsibility, before any formal investigation took place. Realistically, it wouldn't take more than 30 MPH or so of miscalculation of the booster's velocity, to cause the result which happened.

And well, if Musk's lips are moving, he's lying, plain and simple.

But then again, I don't know whether Grumman has done all that much since the F-14.:confused:

I think this could just as easily be categorized or defined simply as, "trust"!

The final orbital mass dictates the orbit. That interface likely added dozens, if not hundreds, of KGs that they calculated as 'left behind' when figuring out fuels and velocities. Rockets work entirely through conservation of momentum - or simply put without math: "speedy thing gets faster as it gets lighter". If they don't drop the interface, then the satellite couldn't get fast enough to reach its orbit, leaving it in a ballistic trajectory that dumps it back on the surface earlier than intended. It never reach orbital velocity, but would have had the interface separated (making the satellite lighter). Given how quickly it fell back, the interface was likely very large, and this is what brought it down faster. Zuma did separate from the Falcon, so SpaceX's portion of the interface worked, and it didn't separate from the satellite, so Northrop's failed (which is stupid, because they built the satellite too). If the Falcon had failed to achieve the necessary velocity, you can bet not only the Govt, but every third party with a telescope would have thrown them under the bus too.

Of course, there are also conspiracy theorists saying that the mission happened exactly as intended, and that the mission needed the satellite returned to earth for some reason (testing a heat shield, collecting a sample, collecting sensor data that couldn't be transmitted for some reason, etc). These people are likely just wrong.

Yeah, the pad failure was SpaceX's fault, plain and simple. At best, maybe ULA sabotaged something, but unlikely. Very low reward for sabotaging a single test launch, against the very high risk of loosing your contract because of your interference with a competitor. Even then, it is SpaceX's job to check their vehicle and mathematics pre-launch and catch mistakes - be them accidents or sabotage.

Lockheed and Boeing also know how to play "the game". While SpaceX performs pretty much all their work in California, Texas, and Florida, Lockheed and Boeing spread their work out to pretty much all 50 states (collectively). When it comes time to pick a contract winner, who do you think the congressmen and women are going to vote for? The company that will bring work to three states, or the conglomerate that will bring work to all 50?