Tesla shares fell over 14 per cent on Friday after company Chairman and Chief Executive, Elon Musk, was charged by the US Securities and Exchange Commission with fraud on Thursday. AP photo.
Tesla shares plunge after Musk accused of tweeting false and misleading information
By mid-afternoon on Friday, Tesla shares had fallen over 14 per cent after the United States Securities Exchange Commission accused company Chairman and Chief Executive, Elon Musk of fraud.
The SEC accused Musk of tweeting false and misleading information last month. On Aug. 7, Musk tweeted that he may take Tesla private at $420 per share with “funding secured”.
The regulator charged that Musk “knew or was reckless in not knowing” that his tweets were false and misleading.
In its lawsuit, the SEC also said it was seeking to remove Musk from his role.
According to Reuters, at the last minute Musk walked away from a negotiation with the SEC that would have required him to give up leadership roles at the company for two years and pay a nominal fine.
While Tesla did not respond to Reuters’ request for comment and the SEC declined to comment on reports of a settlement, the Palo Alto-based company did disclose last week that the US Department of Justice was investigating Elon Musk’s public statements on his plans to take his company private.
Reuters reports that one person familiar with the SEC’s thinking said on Friday that the SEC lawsuit or possible settlement did not preclude further action by the Justice Department.
The Justice Department also refused to comment.
In light of the SEC lawsuit, at least five research firms argue that Musk may have to resign from Tesla.
“I think it was a big mistake to turn down the settlement offer,” CFRA analyst Garrett Nelson told Reuters.
“By choosing to instead fight the accusations, Musk’s future with the company becomes completely uncertain,” Nelson said.
Barclays analyst Brian Johnson told Reuters that “the SEC civil action may lead to Musk’s exit from Tesla (either permanently or temporarily) and the Musk premium in the shares dissipating”.
As for Elon Musk, Reuters reports that overnight, he said he had done nothing wrong and that the Tesla board still supports him.
“The bottom line is, what he did was stupid, it was wrong, I don’t think he’s going to be thrown out,” a large Tesla investor, who asked not to be identified due to sensitivity of the situation, told Reuters.
“My guess is he’ll pay a big fine. I wouldn’t be surprised if as a settlement to the SEC he drops his chair of the board” role.
By 2:53 p.m., EDT, Tesla shares were down 14.27 per cent to $263.63.