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Old 10-08-2018, 10:01 PM   #5751
f-l-y
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Re: TSLA showing cracks?

SEC and Tesla submitted a statement to a judge detailing why their previously agreed-upon settlement should be approved. The decision is due on the 10/10, I believe.

Do we think the judge's approval/rejection is a significant binary event for the stock price? $TSLAQ seems to think Musk's latest tweets will drive the SEC or the approving judge to revoke the settlement.
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Old 10-08-2018, 10:49 PM   #5752
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Re: TSLA showing cracks?

I think it might have a positive effect on price that day, but thats about it
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Old 10-08-2018, 11:16 PM   #5753
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Re: TSLA showing cracks?

Judge not approving would be really bad. Judge approving is a near certainty so nothing happens.
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Old 10-08-2018, 11:32 PM   #5754
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Re: TSLA showing cracks?

Yeah I'm not sure the judge decision is actually significant in any way. Maybe I'm conflating the possibility of a SEC settlement retraction resulting from Musk's latest round of tweets with the "judge decision."

Let me rephrase the question, what are the chances that one week from now the SEC settlement as we know it still holds? whether from the SEC being butt-hurt and pulling out or the judge amending terms etc
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Old 10-08-2018, 11:39 PM   #5755
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Re: TSLA showing cracks?

The SEC settlement will happen, it's a done deal. It's the Justice department that will make news, but that will be a few months away.
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Old 10-08-2018, 11:46 PM   #5756
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Re: TSLA showing cracks?

I'd be very surprised if anything comes out of that investigation. DOJ and SEC tend to defer to each other once a settlement has been reached. They probably keep the file open and will warn TSLA against some behavior (such as by making a thinly veiled threat of litigation if Musk doesn't muzzle his mouth) but it's highly unlikely they have more than a couple junior lawyers putting in significant time on this.
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Old 10-09-2018, 12:34 AM   #5757
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Re: TSLA showing cracks?

This is not true at all. Martha Stewart settled with the SEC (paid a big fine, and was forced to step down from her company for 5 years) and the DOJ still went after her.
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Old 10-09-2018, 12:56 AM   #5758
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Re: TSLA showing cracks?

Martha Stewart was indicted on obstruction, not securities fraud.

DOJ usually respects settlements with regulatory agencies. FTC for antitrust cases and SEC for securities cases. This is really not factually up for debate.
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Old 10-09-2018, 07:45 AM   #5759
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Re: TSLA showing cracks?

Again, I only dispute your "usually" - Martha was charged with insider trading by the DOJ but that charge dropped, and yes she did time for obstruction.

Look up Trendon Shavers, a guy who ran a bitcoin ponzi. Charged by SEC, then DOJ and did about 2 years in prison. How many more do ya want?

And of course Bernie Madoff, charged by SEC and DOJ.
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Old 10-09-2018, 08:49 AM   #5760
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Re: TSLA showing cracks?

Ponzi cases are very far end of the criminal fraud spectrum. They straight up make up numbers and present them as true. Musk pushes the boundaries of GAAP and projections but his numbers, as reported to SEC, have no indication of being outright frauds.

Again, as I have explained before this is just not the type of thing DOJ would go after in the vast majority of cases. DOJ is even less likely to spend resources on this with SEC settlement in place.

I am just telling you this this how DOJ and SEC behave. You can use whatever anecdotal evidence you want but anyone with a passing familiarity with sec and doj enforcement would agree with what I have said in the last few posts.
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Old 10-09-2018, 09:07 AM   #5761
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Re: TSLA showing cracks?

If you read the SEC complaint, there is a pretty clear cause for fraud - there was no "funding secured". The DOJ loves high profile/celebrity white collar cases because it gets news coverage showing they are "doing their jobs" and "nobody is above the law".

Recent news coverage showing white collar crime prosecutions being down are extra pressure to bring a high profile case. It's the perfect fit, so we'll see.

"Deputy Attorney General Rod Rosenstein said Wednesday that the Trump administration was committed to fighting white-collar crime and pointed to recent cases alleging health-care and securities fraud."
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Old 10-09-2018, 01:40 PM   #5762
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Re: TSLA showing cracks?

zzzzzz hope i'm wrong but SEC not gonna do anything bout most recent tweets and nice bounce off 250 is this just gonna do the standard rally back to $300~??
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Old 10-09-2018, 01:49 PM   #5763
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Re: TSLA showing cracks?

2 more days of this and right back to $300. Then Q3 pump on the best possible numbers they can provide, but probably can't get much past $325.

Then the fun ride begins as Q4 is a disaster, possible DOJ atom bomb, and January debt payments that they can't pay. Going to be a fun 3 months.
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Old 10-09-2018, 03:21 PM   #5764
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Re: TSLA showing cracks?

We know they've been stiffing suppliers and today there was the news of a judgment for monies owed to the government for unpaid unemployment taxes: https://twitter.com/Paul_M_Huettner/...083625990?s=19

Skabooshka also reporting the factory was quiet this weekend possibly to avoid overtime pay.

Tooth has talked a lot about suppliers demanding COD but it doesn't seem like that would ever be in a supplier's best interest. Maybe instead the bitter end is failure to make payroll?
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Old 10-09-2018, 03:41 PM   #5765
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Re: TSLA showing cracks?

Payroll is steep with all the OT in Q3, but it's still small compared to the debt payments they need to make in January. Just not possible without a fundraising round which is a longshot and would crush equity.
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Old 10-09-2018, 03:45 PM   #5766
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Re: TSLA showing cracks?

It's not a bank run if you're the first to get your money out.

I find it unbelievable as well that Tesla can't find a way to raise. But the pattern of a large number of unpaid bills - suddenly in the last two quarters + trying to get cashback from suppliers and 90+ day payment terms + slowing production + pushing customer refunds out to 63 days + taking full payment with a delivery date and repeatedly not delivering + mortgaging the very last of their factory and forward lease revenue + Musk acting like a man under extreme stress/obsessed with shorts "winning" + capex reductions + their history of raising and keeping a nice cushion, make no sense whatsoever if they have any ability to raise.

edit: And if this isn't the biggest red flag in the whole thing, their ENTIRE accounting team leaving in the last six months despite Tesla paying multiples of industry pay and generous stock options which they left behind...
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Old 10-09-2018, 03:48 PM   #5767
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Re: TSLA showing cracks?

Quote:
Originally Posted by grizy View Post
Ponzi cases are very far end of the criminal fraud spectrum. They straight up make up numbers and present them as true. Musk pushes the boundaries of GAAP and projections but his numbers, as reported to SEC, have no indication of being outright frauds.

Again, as I have explained before this is just not the type of thing DOJ would go after in the vast majority of cases. DOJ is even less likely to spend resources on this with SEC settlement in place.

I am just telling you this this how DOJ and SEC behave. You can use whatever anecdotal evidence you want but anyone with a passing familiarity with sec and doj enforcement would agree with what I have said in the last few posts.
White collar prosecutions are down because of a few recent court of appeals rulings that raised the bar.

I'm just not sure you can count on Sessions/Trump to follow precedent and there is a colorable case against Musk. I definitely agreee the case would not have been pursued in the past. It's a DOJ decision, not judge or SEC.

Regarding the SEC settlement, there is likely no upside to the judge accepting the agreement, but there is massive downside if the judge rejects it. Seems like a freeroll if you can short now and exit the position before Q3 pump. I'd also say that a judge rejecting this agreement would be likely to be overturned on appeal so that would be a tradeable event too.
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Old 10-09-2018, 05:21 PM   #5768
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Re: TSLA showing cracks?

Trump doesn't care.

Sessions and DOJ lawyers don't want to risk losing and making even worse precedents. Musk's situation is not even close to a slam dunk for the DOJ and presents novel legal issues that DOJ does not want to deal with right now, at least not without an otherwise slam dunk case.
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Old 10-09-2018, 05:29 PM   #5769
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Re: TSLA showing cracks?

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Originally Posted by grizy View Post
Trump doesn't care.

Sessions and DOJ lawyers don't want to risk losing and making even worse precedents. Musk's situation is not even close to a slam dunk for the DOJ and presents novel legal issues that DOJ does not want to deal with right now, at least not without an otherwise slam dunk case.
By "novel legal issues" I assume you mean you think tweets (followed by supporting emails) might have some kind of immunity to the law which is just laughable. It's a slam dunk case.
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Old 10-09-2018, 05:39 PM   #5770
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Re: TSLA showing cracks?

It's not immunity. But it's an additional risk. Like I said before, DOJ/SEC have been reluctant to sue due to recent precedents and they are afraid to lose the presumption of fraud on market, which is the theory underpinning class actions and most of SEC/DOJ's 10b-5 claims.

Even with outright accounting frauds, some claims have been dismissed (circuit split on some issues) due to failure to show causation/harm. If you really care, search Dura Pharmaceutical (SCOTUS) and its progenies. I had to do the same for a sec reg class and, like most of my class and the professor, found the whole thing kind of ridiculous. At the same time, nobody really knew what standards would be fair and still not create a situation where everytime someone loses money on a stock, they could nitpick some accounting/reporting/projection error and file a fraud suit.

Again, I am not saying if it's a good law/policy/situation or not. I am just telling you that given the legal backdrop, Musk's case is not even close to being a slam dunk. You can make a policy argument that it's ridiculous that Musk's tweets aren't enough for a slam dunk 10b-5 securities fraud case. Proving those tweets are frauds under current law is a totally different ball game.

Last edited by grizy; 10-09-2018 at 05:47 PM.
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Old 10-09-2018, 05:50 PM   #5771
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Re: TSLA showing cracks?

A plain reading of Dura shows it to be irrelevant to this case.

In Musk's case there is clear causation (the fraudulent tweet) and clear directly-caused economic loss - the instant spike/forced covering, or the subsequent drop when the truth became known days later (less clear).

In Dura they didn't even show any economic loss. They merely sued for an "inflated price". The complaint itself was poorly crafted.

Dura is irrelevant. I have no idea about the other things you claim, but your citing of Dura as relevant to DOJ decisions about whether to go forward puts your claims in the suspicious basket.
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Old 10-09-2018, 05:55 PM   #5772
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Re: TSLA showing cracks?

Quote:
Originally Posted by grizy View Post
It's not immunity. But it's an additional risk. Like I said before, DOJ/SEC have been reluctant to sue due to recent precedents and they are afraid to lose the presumption of fraud on market, which is the theory underpinning class actions and most of SEC/DOJ's 10b-5 claims.

Even with outright accounting frauds, some claims have been dismissed (circuit split on some issues) due to failure to show causation/harm. If you really care, search Dura Pharmaceutical (SCOTUS) and its progenies. I had to do the same for a sec reg class and, like most of my class and the professor, found the whole thing kind of ridiculous.

Again, I am not saying if it's a good law/policy/situation or not. I am just telling you that given the legal backdrop, Musk's case is not even close to being a slam dunk.
Dura was a 2005 case it isn't new. And it was a unanimous decision with no novel legal issues it just says you need proximate cause like any other tort claim for the last 400 years. Basic logic and statistics tell us that in order to prove causation we need to rule out confounding factors that could be causing a spurious (hehehe) relationship between misrepresentation/corrective disclosure and stock price decline.

Trump's inactive SEC is a policy preference that has nothing to do with fear of setting bad precedent. They want to be hands off to support free enterprise.
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Old 10-09-2018, 05:58 PM   #5773
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Re: TSLA showing cracks?

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Originally Posted by ToothSayer View Post
A plain reading of Dura shows it to be irrelevant to this case.

In Musk's case there is clear causation (the fraudulent tweet) and clear directly-caused economic loss - the instant spike/forced covering, or the subsequent drop when the truth became known days later (less clear).

In Dura they didn't even show any economic loss. They merely sued for an "inflated price". The complaint itself was poorly crafted.

Dura is irrelevant. I have no idea about the other things you claim, but your citing of Dura as relevant to DOJ decisions about whether to go forward puts your claims in the suspicious basket.

Yeah, exactly. All they need to do is have a statistician do an event study and appear as an expert witness. Not exactly an insurmountable hurdle.
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Old 10-09-2018, 06:04 PM   #5774
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Re: TSLA showing cracks?

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It's not a bank run if you're the first to get your money out.

I find it unbelievable as well that Tesla can't find a way to raise. But the pattern of a large number of unpaid bills - suddenly in the last two quarters + trying to get cashback from suppliers and 90+ day payment terms + slowing production + pushing customer refunds out to 63 days + taking full payment with a delivery date and repeatedly not delivering + mortgaging the very last of their factory and forward lease revenue + Musk acting like a man under extreme stress/obsessed with shorts "winning" + capex reductions + their history of raising and keeping a nice cushion, make no sense whatsoever if they have any ability to raise.

edit: And if this isn't the biggest red flag in the whole thing, their ENTIRE accounting team leaving in the last six months despite Tesla paying multiples of industry pay and generous stock options which they left behind...
So assuming that they can't raise for some reason- what does the bank run look like?

Without enough cash to go around Tesla has clearly been prioritizing payments- it has even been reported that Elon himself signs off on all expenditures over a certain dollar amount. I posit this is because he knows who he can stiff and who he cannot.

Musk's Hierarchy of Needs:

1. Payroll
2. Bond repayments
3. Essential suppliers with leverage over Tesla- Panasonic?
4. Non-essential suppliers- Union Pacific, smaller manufacturers, truck drivers...
5. Customer refunds
6. Government/taxes
7. Allocating for future costs like repairs under warranty, legal expenses, etc.
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Old 10-09-2018, 06:13 PM   #5775
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Re: TSLA showing cracks?

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Originally Posted by protonewb View Post
Payroll is steep with all the OT in Q3, but it's still small compared to the debt payments they need to make in January. Just not possible without a fundraising round which is a longshot and would crush equity.
March
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