More Trouble For Musk As Another "Untruth" Emerges

As we enter the third day of the Tesla "going private" saga, one big question continues to haunt investors: who is (are) the source(s) of the "secured funding" that Elon Musk promised he had arranged ahead of his unprecedented tweet that sent Tesla stock soaring, eventually resulting in a delayed halt and made Musk $1.4 billion richer.

As Bloomberg writes this morning, "no one has stepped forward publicly - or privately - to say they’re behind the plan."

People with or close to 15 financial institutions and technology firms who spoke on the condition of anonymity said they weren’t aware of financing having been locked in before Musk’s tweet.

It's not just traders who are scratching their head over this question: late on Wednesday, the WSJ first reported that regulators have also started asking the company if what Musk tweeted was factual and why such a disclosure was made via social media rather than in a filing.

But while everyone has so far focused on the Musk financing tweet, the CEO has now been caught in a second potential "untruth", which would only add to the severity of any market manipulation enforcement action lobbed at the eccentric CEO.

Recall that as part of Musk's Tuesday tweetstorm, when addressing shareholder receptivity, he said that "Investor support is confirmed."

Only, as Bloomberg reported this morning, it wasn't, as this too appears to have been gross hyperbole at best, and outright misrepresentation at worst: "At the California State Teachers’ Retirement System, which as of March owned about 213,000 shares, spokeswoman Michelle Mussuto said there was no advance warning."

“We have not been contacted by Tesla IR,” she said. “They didn’t reach out before the tweet either.”

So here's what we know so far: the "natural" source of cash for a deal of this magnitude, SoftBank, has passed on a possible deal, saying the company was "overvalued", and that following an April 2017  meeting between Musk and Masayoshi San that touched on a potential investment in TSLA (whose stock at the time was far lower), the talks failed to progress due to disagreements over ownership and have not started up again.

Meanwhile not a single bank that would be part of the obvious financing syndiate that would fund such a deal, has been approached by Musk. Finally, the investors, whose support Musk allegedly had canvassed ahead of his announcement, had little idea of what Musk was set to announce.

Surely the SEC will be curious to connect the dots between all these three potential misrepresentations contained in a tweeted "statement" that boosted Musk's own net worth by $1.4 billion.

And then there is a report from the NYT overnight, according to which Tesla and banks are studying a structure that would involve reducing the number of holders such that Tesla’s shares could be delisted from Nasdaq and it would no longer be required to make quarterly filings with the SEC, NYT reports. Call it an "LBO-lite", or what the NYT calls a "going dark" transaction.

While still expensive - it could cost $10 billion to $20 billion - it would be much less so than a full leveraged buyout, the NYT reported.

In this situation, Tesla could buy out many but not all of its shareholders to reduce the total number of investors who hold Tesla stock. One way to make that math work would be to persuade as many small shareholders as possible to sell their holdings.

The largest shareholders of the company — including Mr. Musk, Fidelity, T. Rowe Price and Scotland’s Baillie Gifford, who collectively own about 45 percent of Tesla shares — would not need to sell their stakes under that arrangement.

Tesla’s shares would no longer be listed on the Nasdaq, but investors could buy or sell them on loosely regulated, over-the-counter markets that are typically the domain of small companies. Because shares on these exchanges are generally traded less heavily than those on larger public markets, it would likely be harder for investors to bet against, or short, Tesla’s stock, which is one of the rationales Mr. Musk outlined on Tuesday for taking the company private.

While examining creative alternative structures is great, the problem for Musk is that has already represented a going private deal, together with a take out price, to the public. And with every hour that passes and neither Musk, nor the board, disclose just what were the facts that led Musk to his bizarre announcement, it becomes more likely that the SEC will eventually launch enforcement action against either the company, its CEO, or both.

Finally, as we first noted last night, the SEC has a simple solution it can pursue to end all the debate of Musk's tweet mystery. As former NYSE president Thomas Farley said yesterday, "this is an easy one: ask TSLA to show you the agreement(s) signed by their funding source(s) by 5pm EST that demonstrates the funding is “secured” and “certain.” If there is no such agreement, require a statement by 5:30pm. Inspire market confidence."

With the entire world watching with Musk, or the US capital markets regulator will do next, the SEC may have no choice but to pursue Farley's advice. And judging by the stock price, which recently dipped below the conversion price on the March 2019 converts, the market is starting to get cold feet about this whole soap opera.

Comments

Free This Killtruck Thu, 08/09/2018 - 10:32 Permalink

Why .gov of course, it's the new Government Motors Inc. They'll just digitize a few more billions to prop up that fakery!

His firm has been subsidized from the beginning, by the Obombmao admin. (that my friends is called a twofer)!

Damn, Obominable was a complete failure for America. HE screwed us up six ways to Sunday.

I hope he lands in jail for his high crimes of treason, and general fuckery!

In reply to by Killtruck

james diamond squid pods Thu, 08/09/2018 - 10:58 Permalink

martha stewart must have really pissed someone off in the SEC.  all other celebrities and big shots get a pass.  if the SEC prosecuted----nearly every corporate insider would be in prison.  

steal $5 in a robbery and go to prison.   steal $5 million with insider information and get an SEC participation trophy and membership.

the human species is the problem.

In reply to by pods

lock-stick glenlloyd Thu, 08/09/2018 - 11:47 Permalink

It's all ONE SICK, PATHETIC SPAMMER!!!

•• Adolfsteinbergovitch ("I TORMENT THE WOMAN WHO SUCKS DICK!")

•• Free This (ABOVE, in all his 7th grade glory - JACKASS  as new icon!)

•• roea.rita ("I SUCK DICK ON THE INTERNET FOR LAND ROVERS!")

•• Cryptopithicus Homme (bitcoin spammer - imaginary "friend")

•• lisa.roy39  ("I SUCK DICK ON THE INTERNET FOR LAND ROVERS!")

•• Leakanthrophy (PORN for Jesus!)

•• 07564111 ("I PRETEND I DON'T KNOW ANY OF THEM!")

•• MoreSun (whacked, OH SO WHACKED!!)

•• Africoman

•• Sanctificado

•• beemasters

•• PrivetHedge

•• Cheolli

•• bobcatz

dozens and dozens and dozens of banned log-on's -- more than seven years!

 

....and all the while, the pathetic little SPAMMER sits in his leaky, moldy, smelly single wide in Western New York, surrounded by garbage and dirty clothes, trying to find his dick amidst rolls of fat, talking to his ACTION FIGURES and wondering where his life went.

In reply to by glenlloyd

glenlloyd SAE6065 Thu, 08/09/2018 - 11:44 Permalink

If they let this pass she would have cause to sue for discriminatory enforcement.

This isn't just some game here, this is equity of enforcement. You can't just pick n choose who you want to take down with this stuff. IMO Martha should have sued when the Clintons got away with these types of shitnanigans and she didn't and AFAIC the Hillary server excuse now sets precedent for what the regular folks can file as defense.

Musk needs to be held accountable.

In reply to by SAE6065

Last of the Mi… pods Thu, 08/09/2018 - 12:27 Permalink

 You know, one thing I was thinking is where the heck is Sessions on this? This would be a prime chance for him to step out and factually say "we have concerns about this and we want to make sure no fraud was committed" The meetings with the SEC should have already taken place, the action determined as far a fact checking goes and loading and cocking of the gun if this shit is actually lying. (which I think he is). Where is the source of the funding, the paperwork required and if not why is he not in jail somewhere? They did it to Manafort for a lot less money. 

In reply to by pods

Condor_0000 Free This Thu, 08/09/2018 - 10:53 Permalink

Thank God Trump is president. He would never ever engage in any shady financial dealings.

Oh, if only we could go back to the days of another of our heroes, Dick Cheney and Haliburton. Those were the good old days when we could trust our leaders.

Damn that Obama! Damn him all to hell. That commie destroyed America. And by "destroyed" I mean bailed out capitalist America from the Bush catastrophe and sent the capitalist markets soaring 3 fold. That damned Marxist, socialist-commie! Oooooooo I hate him.

It's just like that famous Marx quote that goes, "Workers of the world, take trillions of dollars and bail out your richest capitalists!" That's exactly what that Marxist-commie Obama did. DAMN HIM!

In reply to by Free This

mtl4 Condor_0000 Thu, 08/09/2018 - 11:16 Permalink

Nice try, marxism is still a failure even if you label it democratic socialism.  

 

Obama did more damage to the US than all other presidents combined.  He was responsible for the collapse of Lybia and Syria which created the refugee crisis yet somehow he received the Nobel Peace Prize?!  The markets went up because instead of letting them correct naturally he instructed the FED to drop interest rates to near zero which created the largest bubble ever, perhaps in history.  The shitstorm from that one has yet to be felt.  How about FACTA which killed americans' ability to do business freely overseas, yep that was him too.  Need I go on?

In reply to by Condor_0000

woody188 Condor_0000 Thu, 08/09/2018 - 12:29 Permalink

The bail outs were entirely socialist (or completely fascist) as they decided who were the winners and who wasn't based on what?

Socialize the losses and privatize the gains. Just think how much better off we'd be if all those banks had gone away 10 years ago like they should have in a capitalist nation?

We'd at least not have to put up wtih NYT op-eds from Jamie Dimon admonishing us for being too nationalist.

In reply to by Condor_0000

opsyn Killtruck Thu, 08/09/2018 - 15:54 Permalink

You know, it's the Wall Street and banking industry whose are emperors without clothes. You should not have a public company with autistic CEO. This is not an insult, I remember how everyone praised Musk like a new Jobs but srsly these people are expecting so much...to keep their money flowing. Electric cars are damn cool thing, aren't they? This bogus around the manufacturer is just stupid. How long we have to keep screaming this before these silly cunts pull the plug on Wall Street? Fire sale would be dashing. 

In reply to by Killtruck

lock-stick ParkAveFlasher Thu, 08/09/2018 - 11:16 Permalink

It's all ONE SICK, PATHETIC SPAMMER!!!

•• Free This (ABOVE, in all his 7th grade glory - JACKASS  as new icon!)

•• roea.rita ("I SUCK DICK ON THE INTERNET FOR LAND ROVERS!")

•• Adolfsteinbergovitch ("I TORMENT THE WOMAN WHO SUCKS DICK!")

•• Cryptopithicus Homme (bitcoin spammer - imaginary "friend")

•• lisa.roy39  ("I SUCK DICK ON THE INTERNET FOR LAND ROVERS!")

•• Leakanthrophy (PORN for Jesus!)

•• 07564111 ("I PRETEND I DON'T KNOW ANY OF THEM!")

•• MoreSun (whacked, OH SO WHACKED!!)

•• Africoman

•• Sanctificado

•• beemasters

•• PrivetHedge

•• Cheolli

•• bobcatz

dozens and dozens and dozens of banned log-on's -- more than seven years!

 

....and all the while, the pathetic little SPAMMER sits in his leaky, moldy, smelly single wide in Western New York, surrounded by garbage and dirty clothes, trying to find his dick amidst rolls of fat, talking to his ACTION FIGURES and wondering where his life went.

In reply to by ParkAveFlasher

lost username Ghost of Porky Thu, 08/09/2018 - 10:48 Permalink

While the Tesla overall situation is less than ideal - if we use the low number from the NYT article of $10 billion to do the LBO-lite deal -- then he could easily fund this by taking another $1 billion cash out of Space X. Also if the Saudi's just bought 3-5% as revealed - then going another 4 or 5 billion in would be a must do to preserve their investment.

In reply to by Ghost of Porky