Elon Musk is always on the cusp of the wind. It was a happy time that 60 satellites were launched, the latest prototype passed cryogenic stress tests for the first time, SpaceX won NASA’s moon landing contract, and Tesla made three consecutive quarters of profit. Then the wind changed, and the earnings conference yelled wTF, a tweet that wiped nearly $15 billion off Tesla’s market value overnight.
In recent days, there has been a big debate in the legal community: Is Musk’s tweet a securities fraud?
Musk: It’s a fascist.
Musk’s SpaceX business is booming in the face of the outbreak:
On April 22, 2020, the Falcon 9 rocket was launched from the Kennedy Space Center base in Florida, sending the seventh batch of 60 satellites into space, and Starlink plans to continue its advance, with Musk saying the satellite’s Internet will be tested within six months.
After two prototype spacecraft, SN1 and SN3, were destroyed in stress tests, the SpaceX manned lunar orbiting spacecraft Starship prototype spacecraft, the SN4, finally passed the “death” stress test, a step closer to realizing a rocket manned lunar orbiting tour.
On April 30, NASA selected SpaceX, Blue Origin and Dynetics to build a lunar landing system that will carry astronauts in 2024.
At the same time, Tesla’s performance exceeded market expectations.
Tesla’s Q1 financial results for fiscal 2020 are scheduled for April 29, 2020, local time. Q1 revenue was $5.985 billion, beating market expectations of $5.9 billion, up 32% year-over-year. Net profit was $16 million, well above market expectations of $200 million.
Tesla’s shares rose 4.08 percent to $800.51 and rose 8.72 percent to $870.30 after the day.’
In fact, Q1 Tesla’s performance in FY2020 was largely due to a 40% year-on-year increase in the number of electric vehicles delivered to users, a much higher amount of money on emissions targets than in the same period last year, and the return of the Shanghai plant on February 10 for consecutive profits.
However, it is worth noting that Production at Tesla’s California plant was suspended on March 24, 2020, so the impact of the outbreak on Tesla will not be apparent until Q2.
According to the latest news, California regional health officials said they would revise the “in-place asylum order” that was scheduled to expire on May 3, either until May, and delay the final resumption of work at Tesla’s California plant, which was scheduled to resume on May 4.
Given the negative impact of the outbreak, Musk’s rush to the fire is also justified. After all, the only thing that underpins Musk’s ambitions is money to study brain-computer interfaces and explore space.
Musk said on a earnings call that California’s epidemic prevention and control measures were fascist, according tomedia The Verge:
Bay Area production cannot be restored, which is a great risk! The forcible detention of people in their homes violates their constitutional rights, which is a terrible and wrong way to deprive people of their freedom. What the fxxk!
Musk’s confusion during the outbreak was a lot of.
On March 16, Musk retweeted a paper on Twitter that suggested that the antimalarial drug chloroquine could help patients with new coronary pneumonia recover faster, and said he nearly died of malaria in 2000. The paper’s author, who was not a medical researcher, was soon overruled.
On March 19, Musk predicted that new cases in the U.S. would be close to zero by the end of April.
Is this securities fraud?
Before that was over, Musk began brushing the screen again on Twitter.
Remarkably, on May 1, Musk added, “Tesla’s stock price is too high in my opinion.” As a result, Tesla’s market value has fallen by more than 10 percent, to about $15 billion.
Therefore, whether its practice sits on securities fraud has become another topic, and legal people have also been talking about it.
Evelyn Cruz Sroufe, a partner at the law firm Perkins Coie, argues that Musk can only be charged with securities fraud if the Securities and Exchange Commission (SEC) or other plaintiffs prove that Musk profited from a fall in the share price by holding a bear position or put option. Evelyn Cruz Sroufe says:
I don’t think it’s illegal, Musk is bragging. He tweeted ‘in my opinion’ and was just expressing his personal opinion.
Alma Angoti, Partner and Co-Head of Global Investigations and Compliance at Guidehouse, says:
A company generally provides evidence and risk factors to convey to shareholders that a share price may be overvalued. Given the facts, the market can analyze, and Musk is only making an informal assessment.
Musk had previously been fined by the SEC for the content of the tweets.
In August 2018, Musk said he was considering privatizing Tesla at $420 a share and that he was well-funded.
As a result, Tesla’s shares rose 10 percent and the SEC launched an investigation. In the end, Tesla and Musk each paid $20 million in fines to the SEC.
In September 2018, a settlement was reached.
In February 2019, Musk again sent a tweet about Tesla’s capacity, and the SEC filed another lawsuit alleging that Musk violated the settlement by releasing important information about Tesla and its investors without permission because the description of the capacity was inconsistent with official data.
Then the two sides reached a new agreement – Musk’s tweets about important information about Tesla are subject to lawyers’ approval.
It is not clear what else the SEC will do this time. But Steve Diamond, a law professor at Santa Clara University, says:
If not approved, Musk risks being brought to court again.
In fact, in a recent interview with Yahoo Finance editor-in-chief Andy Serwer, Buffett also said that he had only met Musk a few times and that Musk had done something remarkable, but made it clear that he would not invest in Tesla.
It’s worth noting that this is tied to Buffett’s long-standing investment approach, not to Tesla itself.
For now, however, Mr Musk’s move does worry investors.