To many it was clear from the beginning: “It’s an easy case,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “He said in the tweet he had financing, and apparently he didn’t. … It’s about as straightforward as you can get.

And on Thursday afternoon, the SEC confirmed that indeed just those two words blasted to the entire world and contained in Elon Musk’s infamous “funding secured” tweet – it would emerge just days later that funding was not, in fact, secured- would serve as the basis for a securities fraud litigation against Elon Musk; and while Tesla wasn’t named in the suit as a defendant, the SEC is seeking to bar Musk, Tesla’s largest shareholder and its top executive, from serving as an officer or director of any U.S. public company.

It almost didn’t happen that way: according to the WSJ, the SEC complaint only came after a last-minute decision by Musk and his lawyers to fight the case rather than settle the charges.

The SEC had crafted a settlement with Mr. Musk—approved by the agency’s commissioners—that it was preparing to file Thursday morning when Mr. Musk’s lawyers called to tell the SEC lawyers in San Francisco that they were no longer interested in proceeding with the agreement, according to people familiar with the matter. After the phone call, the SEC rushed to pull together the complaint that it subsequently filed, the people said.

Considering that this is an open and shut case, one wonders if Musk was once again on drugs when he decided that instead of settling, he would fight the charges. Or he simply saw the “playbook” and decided to roll the dice

In any case, a fighting Elon is just what the SEC – its reputation in tatters after years of not pursuing “big name” stock manipulators – needs to restore its image.

The case ranks as one of the highest-profile civil securities-fraud cases in years. Its filing less than two months after the Aug. 7 tweets by Mr. Musk also marks an unusually rapid turnaround by an agency that has been under fire for its perceived failure to promptly bring significant cases in the financial crisis and other episodes. “It means there was not that much investigation they needed to do to get comfortable that it was a case they should bring, but also a case they can win,” said Michael Liftik, a former SEC enforcement lawyer now at Quinn, Emanuel, Urquhart & Sullivan LLP.

And the reason why the SEC is confident it will win is simple: Musk lied with the clear intent to not only boost the stock price but – and this is the truly criminal part – to “punish” the shorts. The SEC said that contrary to the statements he made in several Twitter messages on Aug. 7, Musk “knew that he had never discussed a going-private transaction at $420 per share with any potential funding source.” The agency said the statements and omissions of fact caused disruption to the market for Tesla shares—which rose more than 10% the day of the tweets—and harm to investors especially the bears. After all, Musk has been fighting a war against short sellers for years.

In fact, it would be very easy to make this into a criminal case if the DOJ decides that it would like to piggyback on what is a slam dunk.

A far bigger problem is now facing Tesla longs: should they express their fanatical support of Musk and stay on board, or admit that there is a problem, and sell. After all, a Tesla without Musk at the top would not only lose the visionary, but would have a tougher time raising funds, according to David Whiston, an analyst for Morningstar Research Services.

“Without Musk, Tesla is just an auto maker burning too much cash and holding too much debt,” Mr. Whiston said.

And with all that in mind, the question is: what was Musk thinking, not only on Aug. 7 with his now infamous tweet, but today, when he decided to tear up the settlement agreement. Actually, we have an idea:

The SEC said in its complaint that “Musk stated that he rounded up the price to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price’.

That would explain a lot.

* * *

After the SEC lawsuit was filed, Musk said that:

“this unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

Of course he will say that. What is far more bizarre, is that the Tesla board – which already failed the company’s shareholders and its own fiduciary duty by giving Musk free reign to do virtually anything and everything, even tweet just two words which have not cost the company billions in market cap – doubled down, and in a statement from the BOD suggested it was willing to fight. And, the cherry on top, is that the Board called Tesla, which has never turned an annual profit, “the most successful US auto company in over a century.”

Here is the short statement issued by the board – where one can find two of Elon’s cousins and one brother – late on Thursday evening:

Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century. Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.

Based on the above, one can be confident that the board is far more familiar with “marijuana culture” than Elon.

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