Tesla stock plummets after SEC's fraud complaint against Musk

Tesla stock plummets after SEC's fraud complaint against Musk

Tesla stock plummets after SEC's fraud complaint against Musk

Tesla has always weathered these storms, and its continued ability to stay afloat amid these challenges is enough to convince many that the electric auto company will be around for a while yet.

"Without Elon, Tesla would be a debt-laden automaker that's burning a ton of cash", said David Whiston, an analyst with Morningstar in Chicago. Musk has blamed short-sellers, investors betting on a collapse in a company's share price, for Tesla's woes.

Musk has since retracted and on August 24, the company confirmed that they would not be pursuing a buyout.

In the court filing, the SEC claims that "Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions".

The SEC's lawsuit claims Musk said a representative from Saudi Arabia's Public Investment Fund had shown interest in taking Tesla private, but that Musk had never discussed any of the specific terms he described on Twitter with the Saudi fund or any other potential backers before making them public. The Tesla boss had added what he thought was a bog-standard 20 per cent premium for take privates.

"We allege that Musk had arrived at the price of $420 by assuming a 20 percent premium over Tesla's then-existing share price, and then rounding up to $420 because of the significance of that number in marijuana culture and his belief that his girlfriend would be amused by it".

The SEC has the power to levy fines on directors and companies if they are proven to have misled investors. But in this case, the commission is not only demanding that Mr. Musk give up any ill-gotten gains and pay penalties; it also wants to bar him from being an officer or director of a public company. But Musk's future at the helm of the electric vehicle company was thrown into question when the SEC sued him on Thursday. On Friday, reports began to circulate that Musk and the SEC had been close to a deal before the SEC filed its suit. He argues even the threat of Musk's departure should be a deal breaker. Now the case looks set to go to court, another headache for Musk to deal with.

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Wall Street analysts also anxious the case could spiral further out of control. Furthermore, Musk would not have had to admit any guilt in the matter.

Musk has long used Twitter to criticize short-sellers betting against his company, and already faced several investor lawsuits over the August 7 tweets, which caused Tesla's share price to gyrate. Analysts have expected Tesla to raise fresh money by selling new shares.

There was evidence of "clear manipulation", he said on TD Ameritrade Network.

As it stands, Musk's future with Tesla remains unclear. Based on that conversation, the bank says "the DOJ's involvement depends on proving the Musk tweet was meant to manipulate the stock".

Those legal skirmishes could ramp up pressure on the board to map out a post-Musk succession plan as questions grow over his fitness for the job.

Musk said in a statement that the SEC's "unjustified action" left him "deeply saddened and disappointed".

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