[pavlov]

The infraction happened in 2004-2013. So that would be over three billion dollars per year.

Microsoft’s operating income in fiscal year 2005 was about $15B and in 2013 almost $27B. So you can kind see where the IRS is getting this number: if they believe that Microsoft evaded tax worth about 10-15% of its earnings before taxes, that’s how it would add up to this whopping sum.

It seems like Microsoft believes they can settle for something much lower. The stock price doesn’t seem to be hurting pre-market at all.

[londons_explore]

> The stock price doesn’t seem to be hurting pre-market at all.

Big investors will have eyes and ears inside the IRS, so will have known for years about this already.

[willcipriano]

I think a lot of the market is people pointing at other people as if they had done the due diligence that they couldn't be bothered with, and those people pointing back.

[brianwawok]

That’s why a scam startup is able to rocket as soon as 1 named investor signs on. See the juice squeezing bag company etc.

[kylebenzle]

Hey Juicearoo was a great product! It solved the problem of me having a bag of juice and needing to get the juice out.

[stephencanon]

They had outstanding product-market fit. The _only_ problem is that the market of people who have juice bags and do not know how to open them (I.e. two year olds) do not make purchasing decisions.

[Drakim]

They should simply have gone the the industry standard route and lobbied to make it illegal to squeeze the bags by hand.

[benreesman]

I’m this close to having this printed and framed, but I can’t find framearoo.com.

[adolph]

On paper it makes sense to have a microprocessor guide the pressure used on fruit and vegetable pulp [0]. Between that and the introduction of software to manage the fruit supply chain, the Juicero embodied Marc Andreessen's prophecy [1].

Unfortunately, they got the verb wrong: software is eating _not_ drinking the world.

0. https://en.wikipedia.org/wiki/Juicero

1. https://a16z.com/why-software-is-eating-the-world/

[jeremyjh]

Does it make sense to have an engine squeeze a pre-packaged bag of juice?

[adolph]

Of course not. However, it wasn’t prepackaged juice (liquid), it was pulp, the part of plants from which juice is squeezed.

Have you ever seen one of those machines in restaurants that from a hopper full of oranges, automatically slices, squeezes the juice into a glass and puts the rind etc into a composting bag? They do that to deliver a fresh glass of juice that people believe has a material difference from a can of frozen concentrate. Juicero was that but simplified and expanded to more than just oranges.

Consider the factory process of making different juices. Might use heat, introduce other molecules, etc. By performing part of the task in the factory and the final extraction onprem, there may be some meaningful differences in the consumable.

But sure, let’s all poke fun at something without considering the operational context.

https://www.ticomachine.com/faq/how-is-orange-juice-made.htm...

[jefftk]

The more you believe that the more you should expect the stock price to move on announcements like this one.

[duxup]

I think the other users point was that in the past the prices didn’t move because people assumed that other people knew what was going on (and they were not selling or driving prices down).

Accordingly the price might not move because of similar assumptions.

To be clear that’s just how I read that comment. I know nothing about this situation with Microsoft.

[chollida1]

> Big investors will have eyes and ears inside the IRS, so will have known for years about this already.

Sorry, just so I'm clear, you are claiming that major hedge funds have "moles" in the IRS that illegally funnel them the private tax information of major public companies?

What possible source do you have for this?

[ericmay]

At this point people assume everything is a scam, everything is "compromised", and everyone except the "little guy" is in on it. It's really silly. You might as well also claim that the IRS has moles inside of Microsoft and is compromised which is why they're going to get this $27 billion in owed payments and investors had no idea!

Better yet, the IRS and Microsoft are working together on a secret AI tax scheme and this is a cover-up for transferring large amounts of funds to the IRS or to Microsoft for the program to work.

[beagle3]

… and yet, when an academic realized that option dating couldn’t happen by chance, it turned out many investors and CFOs were all in on the option backdating scheme, but the IRS wasn’t.

[IG_Semmelweiss]

I don't think it needs to be "moles"

There are tons of "Expert networks" companies where they tap key personnel for market info. I have received these sort of inquiries many times in the past. Hedge Funds are major users of these.

I can easily see the line of inquiry not breaking the law but getting close enough to extrapolate information on the companies being targeted (IRS personnel, for example), without outright naming them.

This is kind of digital fingerprinting, but for companies. You don't may never get the name of the company, but at some point the questions become so specific that shoe will only fit 1-2 companies.

How many companies have personnel primarily in the US, HQ in Ireland, have revenues >1B, and sell operating systems as a primary source of revenue ?

[chollida1]

Not sure your explanation makes sense to me.

I'm also a part of a few expert netowrks and I probably get to take phone calls a dozen times a year to help people who need information on my area of expertice.

What specific person would someone contact to findout that Microsoft has unannounced tax liabilities that wouldn't' in anyway break insider trading rules?

Who possibly could attest to this type of information and would freely offer it up? No serious expert network member would ever do this as it would be the end of their career and expose them to serious jail time.

Perhpas you could fleshout your explanation some more here.

[JumpCrisscross]

> tons of "Expert networks" companies where they tap key personnel for market info

What are confidential, ongoing tax cases at the IRS is not something expert networks provide.

[bsenftner]

At what point does information such as this become "insider information" and illegal to share? These "eyes and ears" need to have their taxes audited...

[xinayder]

Big investors have a pass for doing shady stuff. They can do insider trading (up to a point where it's not considered insider trading), they can break the SEC rules to artificially reduce the share price of a company so they can buy it or drive them to bankruptcy, but a normal person like me and you can't do these things, because we don't have the money to get around with it.

Big market actors are just institutionalized corrupt people working for private companies. Change my mind.

[kylebenzle]

You are correct, this is America where we do A LOT of things that are bad for us because they are profitable.

I'm writing a long form article about this idea, how in America we do stuff like private prisons, allow pollution, the "family" court system and social media for kids even though some countries can easily fix these problems we refuse to address them because just TOO much money is being made (at least that's how the divorce industry was explained to me).

[benreesman]

“Corruption charges?! We have laws against it precisely so that we can do it! Corruption is why we win!”

- Syriana

[Modified3019]

I’d definitely love to read it when it comes out.

[kylebenzle]

I'll be sure to post to HN :)

[kortilla]

> They can do insider trading

This is incorrect. https://www.natlawreview.com/article/sec-secures-largest-eve...

> they can break the SEC rules to artificially reduce the share price

No, stock manipulation with falsification of bad information is also heavily prosecuted.

Can you give specific examples where you think this happened? You might not be using the correct definition of “inside information” or “artificially reduce”.

[xinayder]

A recent one: Unity CEO sold a huge amount of shares a week before they announced the pricing change on Unity.

Pfizer top-people bought a huge amount of shares before their vaccine was publicly approved and they sold it the moment the public was made aware that there was a vaccine for COVID-19 approved by the FDA

Microsoft bought a lot of Activision Blizzard shares a few days before they announced they would buy the company.

Having this thin line separating what's allowed and what isn't is not ideal. If you have privileged information, for example, that your product will be approved, something that isn't public knowledge, it should be considered insider trading.

[kortilla]

> A recent one: Unity CEO sold a huge amount of shares a week before they announced the pricing change on Unity.

It had to be an already scheduled sale or he will get busted. That doesn’t fly with the SEC.

> Pfizer top-people bought a huge amount of shares before their vaccine was publicly approved and they sold it the moment the public was made aware that there was a vaccine for COVID-19 approved by the FDA

By shares with expectation of approval is fine. They didn’t know it was approved.

> Microsoft bought a lot of Activision Blizzard shares a few days before they announced they would buy the company.

Do you realize how stupid this statement is? You buy a company by buying shares. Building up a stake before tendering an offer is the normal process.

> If you have privileged information, for example, that your product will be approved, something that isn't public knowledge, it should be considered insider trading.

That is insider trading and would be prosecuted if that’s what happened.

[gizmo]

Never, because "insider information" is a legal concept that doesn't correspond with what people intuit it means. People wrongly think insider trading is when one party unfairly profits from having important information other investors don't have.

Also, sharing "insider information" isn't illegal. In some narrow cases profiting off of "insider information" is illegal, but in most cases it's not.

[jszymborski]

> unfairly profits from having important information other investors don't have.

It all depends how you come to know the thing, no? If you can infer something from public information others haven't, then bully for you.

I'm pretty sure that if that information is not public, then you're liable. IANAL though so I may be wrong.

[gizmo]

That's totally wrong.

If you make inferences from non-public information (e.g. talking to the CEO) you can freely trade on that, provided the CEO hasn't shared MNPI with you directly.

Every public company has an Investor Relations department that talks to institutional investors every day. Investors wouldn't bother talking to IR if they could get the same information somewhere else. And these communications are not made public and shared with other investors.

[n2d4]

> MNPI with you directly.

Abbreviating that is so misleading, it's incredibly hard to not see it as bad faith! MNPI means "material non-public information". You're saying "non-public information is fine but material non-public information is not", without making it as obvious.

Yes, it has to be material. "Owes $30b in taxes" is ABSOLUTELY material. If on top of that you learn about it from IRS insider contacts, enjoy your time in prison.

Please do read the Wikipedia article; it has a section on the US. https://en.wikipedia.org/wiki/Insider_trading

> SEC regulation FD ("Fair Disclosure") requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large.

[gamblor956]

If you make inferences from non-public information (e.g. talking to the CEO) you can freely trade on that, provided the CEO hasn't shared MNPI with you directly

This is pretty much the literal definition of insider trading, but feel free to follow this advice if you plan on having a long discussion with the SEC while they audit all of your trades for the past decade.

And these communications are not made public and shared with other investors.

This is false. IR departments will only discuss information that is already made available to investors, through press releases or public compliance filings (such as SEC filings). They absolutely will not provide nonpublic material information just because someone asks, and in the event they do so, it's literally their job to provide an investor communication so that the information is publicly available.

[Armisael16]

Unfortunately it’s generally more complex than that, at least in US law - simply having material nonpublic information isn’t enough. It really matters how you got the information.

For example, when Hindenburg Research did a ton of research and discovered that Nikola was basically totally fraudulent, they traded extremely relevant information that wasn’t publicly available. Not insider trading.

Similarly, if Warren Buffet invests in a company, he knows that its stock is very likely to go up (just as a result of the halo effect around him). He doesn’t have to disclose that he plans to buy, though.

[seunosewa]

In which cases is it legal?

[gizmo]

Pretty much all cases?

If you're an institutional investor you can just call the CEO or investor relations and ask them tough questions about their business. Sometimes you can figure out within minutes that the CEO is a bozo.

You can visit their offices and talk to the employees. Are they smart and passionate and hard-working, or demoralized and looking to jump ship?

You can also derive material information for instance through freedom of information requests. Is a business being investigated by the SEC? If you write the right letter you can find out based on the kind of form letter you get in response. This information is clearly material (would move the stock if made public) and non-public (the SEC hasn't disclosed its investigation yet) and yet you're free to trade on this information because you derived it and because any investor would have gotten the same response if they had known exactly which magic words to use in their letter to the SEC.

If the CFO leaks the numbers of the quarter and you trade based on that you risk jail time. If you watch the company parking lot and notice that the finance department and CFO stay at work until 11pm in the week leading up to their earnings report you are free to short the stock based on this info.

[gamblor956]

A lot of what you said is wrong...

Material does not mean "would move the market." It means there is a substantial likelihood that a reasonable shareholder would consider it important" in making an investment decision". https://www.sec.gov/rules/2000/08/selective-disclosure-and-i...

You can visit their offices and talk to the employees.

If an employee tells you something that is nonpublic information, and you act on it, that would likely be considering insider trading by the SEC. There is a fair amount of case law supporting this point. Indeed, the fact that you acted on the employee's information is generally sufficient proof that the information was material; and this is in fact the most common insider trading scenario.

You can also derive material information for instance through freedom of information requests. Is a business being investigated by the SEC?

If the target of the SEC is not aware of the investigation, the SEC will not disclose that information in response to a FOIA request. On the flipside, if a company is being investigated by the SEC, and knows it, that is material information that must be disclosed to the market.

If you watch the company parking lot and notice that the finance department and CFO stay at work until 11pm in the week leading up to their earnings report you are free to short the stock based on this info.

Such behavior would provide no useful information about the state of a company's financials. In the week leading up to earnings reports, the CFO and finance departments generally stay late making sure the financials are in proper shape, whether or not those financials are good or bad. This is standard practice at all publicly traded companies with proper controls, because there is a very short window of time between the end of the financial period and the time it must be reported for regulatory purposes.

[splintercell]

Is there any reason why based on the last example you would want to short?

[benreesman]

In the market you can buy and hold, exploit “grey” edge, be RenTec, or lose money.

[kylebenzle]

Martha Stewart: Convicted in 2004 for insider trading related to the biopharmaceutical company ImClone Systems. Raj Rajaratnam: Founder of the Galleon Group, convicted in 2011 on 14 counts of conspiracy and securities fraud. Jeffrey Skilling: Former CEO of Enron, convicted in 2006 for insider trading among other charges. Michael Milken: Financier and investment banker known as the "Junk Bond King," convicted in 1990 for securities fraud, including insider trading.

[gadders]

Point of order - Martha Stewart was convicted of obstruction of justice and lying to an investigator, not insider trading.

This might not be the most authoritative website but it lines up with what is in wikipedia: https://www.yourdictionary.com/articles/martha-stewart-jail-...

[mensetmanusman]

Information always leaks out, especially with the way every government document is immediately analyzed and parsed by the big players.

The public record is quite public.

[WillPostForFood]

IRS started a tax investigation in 2007 of Microsoft's 2004-2006 tax returns, which has been somewhat exposed to the public due to the lawsuits along the way.

https://www.seattletimes.com/business/microsoft/microsoft-ir...

[JumpCrisscross]

> Big investors will have eyes and ears inside the IRS

This has been going on since 2007. The IRS sued Microsoft in 2015 [1] and been publicly targeting them since 2020 [2].

[1] https://www.seattletimes.com/business/microsoft/microsoft-ir...

[2] https://www.propublica.org/article/the-irs-decided-to-get-to...

[malfist]

Are you really suggesting that investors run spy networks and that they spy on the IRS?

[CamperBob2]

Why not? At least one church did just that.

[jjallen]

It was likely known about and also is a small percent of the market cap. The present value will also be reduced by the time value of money, which is not inconsequential over the quite a few years this will take to settle.

[bmitc]

That's insider trading.

[goodbyesf]

> It seems like Microsoft believes they can settle for something much lower.

They could hire the best lawyers, accountants, lobbyists, etc in the world. Unless someone at microsoft did something criminal, it's likely they could knock a significant portion off the tax bill.

> The stock price doesn’t seem to be hurting pre-market at all.

Microsoft's market cap is $2.5 Trillion. The one-time tax bill amounts to about 1% of its 'total value'. It's like a one time $1000 special property tax on your $100K rental property. It sucks but it's not the end of the world. Besides, even if they had to pay $30 billion in back taxes, MSFT's customers are utlimately going to pay for it, not microsoft. It doesn't affect microsoft's market share in OS, Office, Servers, etc.

[blitzar]

+ 10 years of interest and penalties, compounding.

[littlestymaar]

From the article:

> Microsoft owes the Internal Revenue Service (IRS) $28.9 billion in back taxes, not including penalties and interest

[blitzar]

My bad first scan read (probably wrong now I look at it) was;

The IRS says Microsoft owes an additional $28.9 billion -- in tax for 2004 to 2013 plus penalties and interest

For an SEC filing they really should be declaring the actual value of their liability - the interest on the bill is going to be $10bn+

[cma]

There was close to a zero interest rate during all that time, or does IRS use something way above normal for their rate?

[blitzar]

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.

https://www.irs.gov/newsroom/interest-rates-increase-for-the...

[nkozyra]

Back taxes have a baseline rate that grows at certain increments of lateness but is ultimately capped. I don't think it's in any way tied to the base or prime rate.

[littlestymaar]

Based on what happens in my country, it could be both penalty + some interest rates based on the reference rate (which definitely haven't been zero for the past two years btw) but not equal to it.

[ubermonkey]

>It seems like Microsoft believes they can settle for something much lower.

This is almost CERTAINLY true. MSFT will be able to tie this up in court, and has tremendous motivation to do so.

[dragontamer]

> It seems like Microsoft believes they can settle for something much lower. The stock price doesn’t seem to be hurting pre-market at all

Given the Stock Markets inability to predict the Twitter buyout despite public documents stating Elon Musk's contract to buy at $54.20/share throughout 2022, I'm pretty sure that stock market investors are literally illiterate, unable to read public documents.

Anyone who bought Twitter at $35/share after the contracts public disclosure knows what I'm talking about.

---------

AMC / APE for another example. Anyone who short sold AMC and bought long APE made bank this past year (before the AMC/APE stock ticker merge there were public documents in December 2022 stating AMCs intention to merge the two one-for-one)

I believe I saw an opportunity as wide as $8 for AMC and $1.50 for a legally equivalent APE a few months ago.

Literally public documents with public court signatures and everything, but so many people remaining ignorant for months, providing anyone 'who can read' an opportunity to make tons of nearly risk free money.

[fallingknife]

There are a million reasons that those trades were not free money. e.g. it's quite expensive to short stocks like AMC. Not knowing that makes me think you weren't actually in that trade.

Start putting your money in the market and you won't be talking about easy money for "anyone who can read" for very long.

[claytongulick]

I just had another poster on HN say something similar to me - but about property investing.

Their point was something along the lines of "it doesn't take a genius to buy low and sell high".

My counter point, to which I don't believe I ever got a response, was "oh? try it then"

Markets are easy to read in hindsight. Most folks are predicting a housing market correction over the next 12 months. But, they've been doing that for the past 12 months too, and it hasn't really happened yet (very mild).

So, when to buy? The answer is that it's quite complicated, and the work is in the individual deal - it requires a lot of research, understanding neighborhoods, WFH trends, how to spot "lipstick on a pig" house flips, regulatory issues, flood zones, insurance rates, mortgage rates, warrantable vs non-warrantable loans and what properties qualify, hurricane standards, wiring, electrical service, plumbing, STR income, occupancy rates, management fees, cleaning fees and quality, long term rental income, renter risk profiles and a million other things that go into understanding whether a deal will make money.

No, it doesn't take a genius, but it does take a lot of hard work.

[aifsognionio]

>AMC / APE for another example. Anyone who short sold AMC and bought long APE made bank this past year (before the AMC/APE stock ticker merge there were public documents in December 2022 stating AMCs intention to merge the two one-for-one)

This is called "pairs trading", right? Is there any way it can blow up? Remember that this is AMC, which could be out of business in six months or could go up 3000% in another idiotic bubble.

I made a fair bit of money off Twitter because it was as simple as buying stock at the market rate. Anyone who reads the papers knew the price of Twitter to the penny and could have bought in with a phone call. The sort of trade you're talking about sounds harder to pull off safely. That's no excuse for the hedge funds, of course.

[smcl]

I don't think it's quite that simple. After the offer was submitted he famously tried hard to NOT buy Twitter. In the end his attempts to back out of the purchase because of the supposed undisclosed bot problem were thrown out in court, but iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something. I guess it comes down to "do you believe Elon Musk when he says something" and plenty of people understandably didn't.

That doesn't make them "literally illiterate" though.

[dragontamer]

> but iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something.

That clause was clearly for things outside of Elon (or former Twitter)'s control. Like if a government stepped in to stop the purchase.

Elon never had a good counter argument. So it was simply a case of those who were able to read the public court documents vs the ones who believed Elons out-of-court media blitz.

Alas, the only arguments that matter in court are the arguments that are filled in court. None of the discussion points you talked about even made it to the case, they were laughed out long before Elon gave up and bought Twitter.

------

Reading. It's a superpower. That's what the past year has taught me. A surpring number of people cannot read and will believe falsehoods even if they contradict written and agreed upon documents.

[aifsognionio]

>iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something.

He couldn't have. That clause protected Twitter, not him. It ensured Twitter would still get something in case outside forces, like government regulators or financing falling through, prevented the deal. It did not give Musk the right to pay a penalty and back out.

Twitter explicitly reserved the right to sue for specific performance, i.e. to force the deal through rather than merely getting damages. Musk explicitly signed away any rights to investigate or back out. Twitter was honest and forthright so any fraud claims were nonsense. Musk didn't have a leg to stand on, legally or factually.

The most he could have done was tie things up in court. But the courts can throw out bad-faith lawsuits pretty quickly.

https://www.nytimes.com/2022/07/11/business/dealbook/elon-mu...

The other guy you're talking to is being a dick. There was a concerted disinformation campaign from Musk and friends, and the papers were not willing enough to call "bullshit" on the front page. The truth was out there but hardly staring you in the face.

But hedge funds have teams of lawyers reading this stuff all day long. They have no excuse for not seeing through Musk's chicanery.

[kllrnohj]

> and the papers were not willing enough to call "bullshit" on the front page. The truth was out there but hardly staring you in the face.

It kinda was, though. A bunch of lawyer-reacts at the time basically were "this isn't financial advice, but lol Musk is fucked and the Delaware court doesn't screw around or delay"

[generic92034]

Do you have a link to the public documents? A short web search gave me nothing.

[dragontamer]

https://www.wlrk.com/docs/76660099_Final-Verified-Complaint....

This was my first search on Google, but there were many, many, many documents of this nature.

Is this doc sufficient? Or are you looking for something else? I'm aware of earlier docs but it gets more legalize and arcane the further back you go.

By the time the trials started, the argument from Twitter was incredibly strong and well documented. But the stock price of Twitter was still like $40 so you'd have lots of opportunity to make money on the trade (Musk promised to buy at $54.20 after all)

[generic92034]

Thanks, I did not see such a doc on the first three pages, so I am wondering if I was using bad search terms. However, looking through that document and not being a lawyer I am not feeling confident to interpret it correctly. What is a "Verified Complaint" in the first place? Are the items under "Nature of the Action" approved by the court or are they just claims of the complaining side? Also I am generally feeling not all that confident that phrases in a legal text have the same meaning I am used to.

All of that contributes to a completely different picture for me, compared to your statements. Sure, I can read documents like that (if I can find them, if I think of searching for them, ...), but I am not at all confident that my literal interpretation is sound. Thus my perceived risk of an investment would be much higher than yours.

So, maybe literacy is not the point here, but rather confidence in interpreting legal texts correctly, a good grasp of contract law and optimism/experience regarding external factors.

[dragontamer]

That's the best part of American courts.

You DO NOT need to be a lawyer to get the arguments. By the time the discussion reaches this stage, the arcane bits are stripped out and referenced explicitly.

In fact, the jury are laypeople, just average Joe's and Jane's. All arguments must be simplified to a point that average people can understand. So it's a good point to pickup info.

---------

Here's a few key events to note on this particular trial:

1. Strong opening argument from Twitter over the contract. My opinion of course, but just read the document and get a gist of the argument yourself.

2. Weak opening arguments from Musk's lawyers.

3. Repeated reprimands from the trial judge for various mistakes the Musk lawyer team were committing

4. Inconsistency between what Elon Musk was saying in public / in the media and what his lawyers were saying in the trial.

-------

Note that in this special case, a judge decided the case instead of a jury. But the argument style at this late stage is simplified to the point where ordinary people / a jury can understand in any case.

[generic92034]

That does not change that I cannot categorize the document you have linked, nor its parts, see my previous questions in that regard: "What is a "Verified Complaint" in the first place? Are the items under "Nature of the Action" approved by the court or are they just claims of the complaining side?"

[porb121]

yeah chief I'm gonna need you to google "stock borrow rate" and get back to me when you've made it through the investopedia page