Any American millennial would probably flinch upon hearing the word 'Enron', a name plagued with so much infamy it has become a metaphor for corporate corruption and fraud. Spear-headed by the then audacious CEO Ken Lay, Enron showed promise of becoming a paragon of corporate America, even making Fortune's list of 100 best companies to work for at the time (oh the irony!).



Recently, Elon Musk was forced to step down from his position as Tesla CEO in compliance with an  agreement to resolve the SEC's securities fraud charge against him. Apparently, a series of tweets, especially one made last August 7, 2018 where Mr. Musk claimed he "could take Tesla private at $420 per share (a substantial premium to Tesla's trading price at the time) and that funding for the transaction had been secured, with the only remaining uncertainty of shareholder vote." was subtly mendacious. "In truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies." reads the report of Ms. Stephanie Avakian, Co-director of the SEC's Enforcement Division. This misleading information from Mr. Musk's tweet was linked to a sudden stock price jump of around 6% for Tesla. From a financial viewpoint, such an action whether intended or not by Mr. Musk resembles a recurring symptom of Enron during its nascent days in the stock market, though Enron's fraud is more furtive and damaging. Nonetheless, mayhap traumatized by the Enron fiasco, the SEC persisted with its charges in an effort to reduce risk and safeguard investors. Remember that Enron's accounting division had made-up entities of which it was supposed to conduct its trades with, including business agreements that were never seen to fruition. In effect, Enron was able to build up a facade of profit, when in reality the organization was sinking in debt. Now, aren't these signs quite similar to the effect Elon's tweet had on Tesla's stock price? Again, Mr. Musk's case is actually light considering there is also no solid evidence that securing funds was not realizable.


Comparing the 2 situations, the SEC - an organization that has struggled with security fraud - from Enron's ethereal business partners to Lehman's toxic mortgage-backed securities, had no choice but to pursue the charges, whether Mr. Musk was able to secure such a transaction or not. The fault does not after all gravitate around Mr. Musk's tweet, but at the effect it had on the stock price.  Don't you think this story would have gone differently if the stock price didn't move up 6%?






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