Will Musk be fined this time? WTF at the earnings conference, a tweet caused a market value of tens of billions of dollars to evaporate. Buffett: Will not invest in Tesla
Musk has done a lot of confusing things during the epidemic.
Text | Fu Jing
Elon Musk is always at the center of controversy.
First, 60 satellites were launched into space, the latest spacecraft prototype passed the low-temperature pressure test for the first time, SpaceX won the bid for NASA's moon landing contract, and Tesla achieved profits for three consecutive quarters for the first time. It can be said that good things happened one after another.
Then the situation suddenly changed. At the earnings conference, someone shouted "WTF". A tweet caused Tesla's market value to evaporate by nearly $15 billion overnight.
Recently, there has been a heated discussion in the legal circle: Does Musk’s tweet constitute securities fraud?
Musk: It's fascism
Despite the pandemic, Musk's SpaceX business is still thriving:
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On April 22, 2020, the Falcon 9 rocket was launched from the Kennedy Space Center in Florida, USA, sending the seventh batch of 60 satellites into space. The Starlink project continues to advance, and Musk even stated that satellite Internet will be publicly tested within 6 months.
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After the two prototype spacecraft SN1 and SN3 were destroyed in pressure tests, SpaceX's manned lunar spacecraft Starship prototype SN4 finally passed the "death" pressure test, which is one step closer to realizing the rocket's manned lunar flight sightseeing plan.
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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 also exceeded market expectations.
On April 29, 2020, local time, Tesla announced its Q1 financial report for fiscal year 2020 as scheduled. The report showed that Q1 revenue reached US$5.985 billion, higher than the market expectation of US$5.9 billion, a year-on-year increase of 32%. Net profit reached US$16 million, far higher than the market expectation of a loss of US$200 million.
Leifeng.com learned that after the good news of the financial report came out, Tesla's stock price rose by 4.08%, closing at US$800.51, and rose another 8.72% after the market, with the stock price rising to US$870.30.
In fact, Tesla's performance in the first quarter of fiscal year 2020 was mainly due to the following: the number of electric vehicles delivered to users increased by 40% year-on-year; the money earned on emission indicators was much higher than the same period last year; and the Shanghai factory resumed work on February 10 and achieved continuous profitability.
However, it is worth noting that Tesla's California factory suspended production on March 24, 2020, so the impact of the epidemic on Tesla will only be apparent in Q2.
According to the latest news, California regional health officials said they would revise the "shelter-in-place order" measures that were originally scheduled to expire on May 3, and the implementation period may be extended to the whole of May. The final resumption time of Tesla's California factory, which was originally scheduled to resume work on May 4, will also be postponed by at least one week.
Considering the negative impact of the epidemic, it is understandable that Musk is anxious and angry. After all, the only thing that can support Musk's ambitions in researching brain-computer interfaces and exploring space is money.
According to foreign media The Verge, Musk said in a financial report conference call that California’s epidemic prevention measures are simply fascist:
The Bay Area production cannot be restored, which is a huge risk! Forcibly detaining people at home and violating their constitutional rights is a terrible and wrong way to deprive people of their freedom. What the fxxk!
Leifeng.com learned that Musk has done a lot of confusing things during the epidemic.
On March 16, Musk retweeted a paper that argued that the antimalarial drug chloroquine could help COVID-19 patients recover faster, and said he almost died of malaria in 2000. The author of the paper was not a medical researcher, and his claim was soon overturned.
On March 19, Musk predicted that the number of new cases in the United States would also be close to zero by the end of April.
Is this securities fraud?
This is not over yet, Musk started to flood Twitter again.
It is worth noting that on May 1, Musk said again, "In my opinion, Tesla's stock price is too high." As soon as this statement came out, Tesla's market value fell by more than 10%, about 15 billion US dollars.
Therefore, whether its practices constitute securities fraud has become another topic, and relevant legal professionals are also discussing it.
Evelyn Cruz Sroufe, a partner at Perkins Coie, believes that Musk can only be charged with securities fraud if the U.S. Securities and Exchange Commission (SEC) or other plaintiffs prove that Musk profited from the decline in stock prices by holding short positions (bear covering) or put options. Evelyn Cruz Sroufe said:
I don't think it's illegal, Musk is just bragging. He said 'in my opinion' in his tweet, just expressing his personal opinion.
Alma Angoti, Partner and Co-Head of Global Investigations and Compliance at Guidehouse, said:
If a company wants to convey to shareholders that its stock price may be overvalued, it will generally provide evidence and risk factors. Only by giving facts can the market analyze, and Musk is only making comments in an informal way.
Leifeng.com learned that Musk had previously been fined by the SEC for the content of his tweets.
In August 2018, Musk said he was considering taking Tesla private at $420 per share and had secured funding.
After this statement was made, Tesla's stock price rose by 10%, and the SEC also began to investigate. In the end, Tesla and Musk each paid a fine of $20 million to the SEC.
In September 2018, the two parties reached a settlement agreement.
In February 2019, Musk again tweeted about Tesla's production capacity. Because the description of the production capacity was inconsistent with the official data, the SEC filed a lawsuit again, claiming that Musk had released important information about Tesla and investors without permission, violating the settlement agreement.
The two sides later reached a new agreement - Musk's tweets releasing important information about Tesla must be approved by a lawyer.
It is not clear what other actions the SEC will take this time. However, Steve Diamond, a law professor at Santa Clara University, believes:
Without approval, Musk would risk being sued again.
In fact, Buffett recently said in an interview with Andy Serwer, editor-in-chief of Yahoo Finance, that he had only met Musk a few times and that Musk had indeed done remarkable things, but he 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 and is not specific to Tesla itself.
However, as it stands, Musk's every move does cause investors to worry.
Source:
[1]https://www.theverge.com/2020/5/1/21244747/elon-musk-tesla-tweets-shares-sec-settlement-stock
[2]https://www.leiphone.com/news/202005/tilS5sd4ClqVQLpc.html
[3]https://ir.tesla.com/static-files/c1723af4-ffda-4881-ae12-b6f3c972b795
[4]https://www.benzinga.com/top-stories/20/05/15936592/heres-what-warren-buffett-thinks-about-tesla-and-elon-musk
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