On the other Tesla thread I posted that it is virtually impossible for me to imagine how “funding secured” is not false and misleading in violation of SEC Rule 10b5-1.
According to CNBC:
Under the terms of the deal, Musk and Tesla would have had to pay a nominal fine, and he would not have had to admit any guilt. However, the settlement would have barred Musk as chairman for two years and would require Tesla to appoint two new independent directors, reported CNBC's David Faber, citing sources.
Musk reportedly refused to sign the deal because he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the sources said.
Musk is a genius, an entrepreneur, the next Edison, whatever. I happily will stipulate that.
But, in this instance, pulling out of this deal was incredibly stupid of Musk. In terms of the way the rule works Musk’s state of mind, and what Musk believed, is not the question. The question is when Musk tweeted “funding secured” would a reasonable investor have wanted to know that, in fact, Musk had not secured funding.
Applying facts to Rule 10b5-1 often is very complicated. This is not one of those situations.
On the facts as we believe them to be I believe that what Musk did is squarely and unequivocally violative of Rule 10b5-1.
The SEC, apparently, offered him what I consider to be a reasonable deal. He should’ve taken it.
(I do not have this opinion merely because I have a pulse and I read the news. I worked as an associate in the mergers and acquisitions litigation department of a giant corporate law firm engaged in takeover litigation where 10b5-1 questions arise in every single deal. Also, for 14 years at a hedge fund, I was the person responsible for conducting Rule 10b5-1 analyses.)
