Tesla's Musk pulled plug on settlement with SEC at last minute

Marcus Newton
September 29, 2018

Shares of Tesla dived 11 percent on Friday as Wall Street anxious the lawsuit could force Musk to step down and make it hard for the loss-making carmaker to raise more capital.

The US Securities and Exchange Commission could force Musk to step down as boss of his own company.

The SEC determined that Musk came up with that figure because it was 20 percent above Tesla's August 2 closing price of $349.54 and then rounded it up from $419 because his girlfriend thought it "would find it amusing, which admittedly is not a great reason to pick a price".

Musk had a way to avoid going to court, and he didn't take it.

One person with knowledge of the SEC's thinking said on Friday that the SEC lawsuit or a potential settlement did not preclude further action by the Justice Department.

But without Musk as a figurehead, the sort of company strategy, brand image, and vehicles seen from the company could easily take a different turn. "Integrity is the most important value in my life and the facts will show I never compromised this in any way", he said.

More news: Kavanaugh nomination advances amid call for Federal Bureau of Investigation probe, Senate vote delay
More news: LG Confirms the V40 ThinQ With Five Cameras
More news: Breaking Down The Kavanaugh Hearings | On Point

On Thursday the U.S. Securities and Exchange Commission filed a civil complaint in U.S. District Court in Manhattan seeking to oust Musk and alleging that he committed securities fraud with false statements about plans to take the company private.

The SEC recommends Musk pay a penalty and seeks to bar him from being an officer or director at a public company. According to CNBC, Musk could not accept that deal.

The 47-year-old billionaire entrepreneur has been directly involved in nearly every detail of Tesla's product design and technology strategy, and is credited as the driving force behind the loss-making company's ability to raise capital.

Some analysts said SEC's action was the beginning of a legal battle with authorities, short-sellers and other investors over Musk's actions that could cost Tesla heavily.

The firm chided Tesla as a company "that has always over promised and under delivered". The department of justice too is now looming into Musk's tweets and could bring a criminal case if it finds he deliberately misled investors. But after Musk's lawyers turned it down Thursday, the sources said, the agency "rushed to pull together" the complaint they filed that afternoon.

"Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful USA auto company in over a century". Musk's nine-word tweet could be the most costly mistake he has ever made.

Other reports by MaliBehiribAe

Discuss This Article