by Dave Kranzler of Investment Research Dynamics
“…when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.” – Francisco D’Anconia’s Money Speech, “Atlas Shrugged”
The SEC ended up settling with Elon Musk for violating securities laws with his “funding secured” tweet. Musk and Tesla will each pay $20 million in fines and Musk will be barred from acting as Chairman of Tesla but will remain CEO. I doubt the SEC will investigate to what extent, if any, Musk and his family and friends took advantage by accumulating stock and call options ahead of Musk’s tweet, which triggered an $87 move higher in the stock price. Certainly we know Musk and his family controls an offshore stock account in the Cayman Islands.
Thirty years ago, Musk would have been forced to serve jail time for securities law violations. Ask Michael Milken and Ivan Boesky about that. The last time a corporate CEO was incarcerated for securities laws violations was Qwest’s Joe Nacchio in April 2007.
Notwithstanding the fact that Musk remains CEO of Tesla, the Company is on a path toward insolvency within 12-18 months. Just like Enron’s auditors before it, I’m sure Price Waterhouse will have no problem cooking up financial statements for Q3 which show a GAAP-manipulated profit of some sort. But make no mistake, rigged GAAP accounting can not change the fact Tesla continues burning billions in cash – nearly $2 billion in the first six months of 2018 between operating activities and investing activity.
I’m hopeful the Justice Department investigation of Musk and Tesla will produce results that are more reflective of Rule of Law than the SEC delivered. Clearly the SEC has once again sent the message to the world that crime pays in the United States if you have a bank account large enough to cover the tab. But, at the end of the day, the fate of Tesla is subject to the Laws of Economics. That is a battle Musk and Tesla have no hope of winning.
What a fucking comical charade. They take a slam dunk case and settle??? At least now we know how serious they are about prosecuting securities fraud among the privileged few. And people wonder how Madoff could get away with such a gigantic heist for so long??? Seems pretty clear the rules are set up to protect the elite crooks in our financial system. – Short Seller’s Journal subscriber