The New York Times reported on August 14th (“Tesla Board Surprised by Elon Musk’s Tweet on Taking Carmaker Private”) what many of us already suspected: Elon Musk’s LBO tweet was a fraud. It was an off-the-cuff outburst striking out at short sellers and other critics: “Two people familiar with the chain of events said that in a conversation with an informal adviser about the mess he had gotten himself into, Mr. Musk said he had taken to Twitter impulsively. He said he had done so because he was not the kind of person who could hold things in, and was angry at the company’s critics.” So rather than call their bosses or their mommies, Musk decided to manipulate Tesla’s stock price. Assuming the Times’ reporting is accurate, this appears to meet the “intent” standard required to convict Musk of securities fraud under Rule 10b-5. And if this tweet alone doesn’t meet that standard, the series of misleading blog posts and tweets that followed create a pattern that certainly meet a standard of willful conduct sufficient to show “intent.”
Musk confirmed in an August 13th blog posting that his so-called discussions with the Saudis did not rise anywhere close to the level of securing financing as he claimed in his August 7th LBO tweet. This was also confirmed by The New York Times: “three people familiar with the workings of the Saudi fund cast doubt on [Musk’s] account. They said the fund had taken none of the steps that such an ambitious transaction would entail, like preparing a term sheet or hiring a financial adviser on the deal.” Further, “even if the fund were ready to move forward with such an agreement, it would invite review by the Committee on Foreign Investment in the United States, the government body that reviews the nationalsecurity implications of such transactions.” Musk’s statement that the head of the Saudi fund has final investment authority also demonstrates ignorance of how things work in the kingdom; only Crown Prince Mohammed Bin Salman has final say in Saudi Arabia over a decision like this.