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SEC vs Elon Musk? Tesla shares plunge over 12 percent Friday

Written By | Sep 28, 2018
SEC vs Elon Musk and Tesla shares

A reenactor portrays a traveling Medicine Show salesman, c. 1830, at the McHenry County, Illinois, Trail of History festival at Glacial Park in the village of Ringwood, Illinois. (Caption and image via Wikipedia, CC 3.0 license. Via “Medicine Show” link.)

WASHINGTON. What goes around comes around. At least occasionally. We’re referring to one-time master gamesman Elon Musk. The SEC finally did what it should have done years ago. Wall Street’s chief regulatory agency has filed a lawsuit – SEC vs Elon Musk (?) – against the fake auto miracle worker for his obviously illegal “tout by Tweet” caper. Recovering Tesla shares tanked once again.

The not-so-secret origins of SEC vs Elon Musk

Previously, after another of TSLA’s periodic plunges, Musk belligerantly tweeted away in defense of his fake assets. He claimed he’d lined up a bunch of rich dudes from the Middle East and elsewhere. Their aim? To help Musk take Tesla private, saving the company’s fake stock from another of its predictable plunges. And, of course, saving his colossal auto Ponzi scheme from further government scrutiny.

Musk has led a charmed life over the past several years. Something of a 21st century industrialist-snake oil salesman, he makes a fortune as his company cranks out – very slowly – its showy but problem-plagued, taxpayer-supported luxury automobiles. Yet his vastly overvalued fake company Tesla (trading symbol: TSLA) has not and never will make a profit at the rate it’s going.

True, Amazon’s Grand Poohbah, Jeff Bezos, started out his online bookselling company the same way, stating it was more important initially to build market share, not make profits. But Bezos eventually delivered the goods, big time. Again and again, Musk has not.

Wall Street has blithely ignored the fact that, like its splashy Emperor, Tesla has no P&L clothes. The result: massively pumped up Tesla shares trading on nothing but air. Of course, such stocks do occasionally hit big air pockets. But every time Tesla did, Musk always had an excuse. So up went those overpriced shares again.

Musk Magic is getting thin

After that Twitter Caper, Tesla shares haven’t been so lucky. True, Musk’s magical Tesla Tweet goosed TSLA’s sagging fortunes once again, this time with promises of a lucrative shareholder buyout. But they dropped once again barely a day or two later when Musk had to admit his big “going private” deal was another one of his increasingly fanciful pipe dreams. Oops. Down go those Tesla shares that just went up.

But that’s what finally caught the SEC’s attention.

Asleep at the switch for years, probably due to pressure from the Tesla Fable-loving Obama administration, the SEC leaped into action at last, even as Musk pumped up his sinking Tesla shares with his latest Big Lie via the Twitterverse. That’s stock manipulation, pure and simple. It violates Federal law. We duly noted that in earlier columns while other financial columnists slumbered. They were still in a stupor, apparently, from the fumes given off by Musk Magic.

Now they all have to deal with what we’re tentatively calling SEC vs Elon Musk. Aside from any number of penalties for Musk and likely Tesla, the SEC also wants to oust Musk from having any managerial responsibility for Tesla at all. Watch for Tesla shares to plunge again and again when each negative headline hits.

ZeroHedge weighs in with the details as Tesla shares tank Friday

ZeroHedge– which has been on to Musk’s artful dodging nearly as long as we have – has dug out the details of SEC vs Elon Musk for all of us Friday morning. (Chart also courtesy ZH.)

SEC vs Elon Musk

Tesla chart, 09-28-2018, via ZeroHedge.

“Tesla shares have continued their plunge this morning, down nearly 13% from the Thursday close in the aftermath of the SEC securities fraud lawsuit aimed at Elon Musk directly, as investors realize that in addition to seeking unspecified monetary penalties, the regulator will ask a judge to bar Musk from serving as an officer or director of a public company.

“Predictably, the Tesla Board doubled down in its defense of the embattled CEO, saying that it is ‘fully confident in Elon, his integrity, and his leadership of the company,” however doubt is creeping that Musk may soon no longer be part of the company that made him a household name, and with it come estimates of just what Musk’s value is to Tesla.”

What will happen next to Tesla shares?

Maybe Musk’s handpicked Tesla board is puffing on the same stuff he is. The SEC may want some changes in the boardroom as well in any SEC vs Elon Musk settlement. But let’s turn this back over to ZH. (Bold text below by ZeroHedge.)

“In a note titled ‘Lawsuit Secured,” Barclays tries to calculate precisely what the Musk ‘premium’ is, which it calculates at $130, and writes that ‘should the SEC be successful in barring Mr. Musk from serving as an officer or director, investors would focus back on the value of Tesla as a niche automaker, rather than a founder-led likely disrupter of multiple industries.

“Explaining how the lawsuit will likely play out, Barclays writes that Musk, who reportedly declined a settlement with the SEC, is entitled to a jury trial, plans a vigorous defense around his claim that he acted, as his statement later on Thursday noted ‘in the best interests of truth, transparency and investors.’ As such, and based on Musk’s comments before and after the notice, a defense along the lines that he didn’t intend to deceive investors as he ‘believed’ that his contacts with the unnamed sovereign wealth fund meant that funding was indeed likely to be secured.”

Yeah, and this writer “believes” he’ll be richer than Warren Buffett and Bill Gates by COB today. The odds of that happening are about the same as the odds were when Elon tweeted out his “sincere beliefs,” pumping up his sinking TESLA shares once again. The SEC has constantly sued and shut down penny stock-touting brokerage “boiler rooms” for decades for doing pretty much the same thing. Not for nothing is this kind of phony stock touting tactic known as “pump and dump.” That’s what the incoming SEC vs Elon Musk suit is really all about.

As for the rest of Wall Street…

As far as the rest of Wall Street is concerned – aside from TSLA shareholders that is – after a red-ink opening, major market averages are mildly higher as we head toward 2 p.m. Friday. In other news that’s helped stall the market lately, the Kavanaugh Kabuki Kaper has faded for the moment, as the Trump administration’s latest Supreme Court nominee heads for likely confirmation.

(Expect more trouble, however. The Soros-paid leftist thugs that currently own the Democrat Party will have plenty of paid “demonstrators” on tap to greet the (apparently) new Supreme Court Justice in front of the Court building itself.)

Meanwhile, traders get more and more nervous about the Trump-China trade standoff. But then again, after sucker-punching the Obama Administration for 8 years on trade and stealing American industrial and trade secrets right and left, the Chi-coms simply don’t know what to do about the current “buffoon” living at 1600 Pennsylvania Ave NW.

That regime simply doesn’t know what to do with a U.S. President who actually loves his country and supports the millions of American workers whose livelihoods have been sapped by the Chicoms’ love of stolen technologies. Consequently, they go tit for tat vs. Trump’s tariffs. But they’re only succeeding in tanking their own economy. Who knew?

Oh, Canada. Wake up, eh?

In addition to SEC vs Elon Musk, Kavanaugh vs Democrat-Socialists and China vs Trump, Canada’s absolute refusal to negotiate key NAFTA won’t end well either. And then we have the U.S. Federal Reserve blithely jacking up interest rates again. Oh, and yes.  Those pesky November elections are heading our way. They’re guaranteed to ignite a Blue Tsunami, wiping all those evil Republicans off the face of the earth. What a fine prospect that one is for giddy investors feasting on all those Trump Rallies. All these, and more, serve to add a few more levels to this autumn’s “Wall of Worry” on Wall Street.

Yes, the market continues to climb. But rather feebly. Perhaps this latest chapter in the Trump Rally is running on fumes, at least for now. We should find out soon. October begins this coming Monday. And, like September, it tends to be a notoriously dangerous month.


—Headline image: A reenactor portrays a traveling Medicine Show salesman, c. 1830, at the McHenry County, Illinois, Trail of History festival at Glacial Park in the village of Ringwood, Illinois. (Caption and image via Wikipedia, CC 3.0 license. Via “Medicine Show” link.)


Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17