Securities Fraud Is Alive and Well

The Credit Strategist Blog

Elon Musk has again managed to make a mockery of our securities laws. He somehow managed to convince a jury (I would say a jury of his peers but that would only apply if he were in the circus) that his 2018 tweet that he had secured funding to take the company private at $420/share did not constitute securities fraud. In view of the fact that U.S. District Judge Edward Chen ruled before the trial that Musk’s statements were false and that Musk acted recklessly in making them, we can only conclude that the jury determined that the statements weren’t sufficiently material to affect investors and therefore did not cause them to sustain losses. To anyone who understands markets, such a conclusion beggars reason and ranks in stupidity with the decision to purchase TSLA stock at current valuation levels (actually at the valuation levels at which they began the year before doubling). We see again that TSLA has no peer when it comes to convincing people to park their brains at the door.

I have not seen the jury instructions issued by Judge Chen but in view of his pre-trial findings regarding Musk’s tweets, I presume he gave instructions on the issue of “materiality” and the jury either misunderstood or ignored them. After spending three days watching Musk testify, perhaps the jury fell under his spell and engaged in jury nullification (that’s when a jury ignores the law and lets someone get away with murder). Based on what I read of Musk’s testimony, it couldn’t have been the substance of his testimony that saved him.