Markets to Elon Musk: Stop messing around and settle with SEC

Jermaine Castillo
September 30, 2018

Shares plummeted 13% as investors and Wall Street analysts dove into what the suit might mean for the electric-car maker.

Musk tweeted the information to his 22 million followers without discussing it with Nasdaq, the index on which Tesla stock is traded. The regulator is seeking to bar Musk from serving as 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. Instead, drama surrounding Musk is once again taking center stage.

The Securities and Exchange Commission has opened a case against Tesla and SpaceX CEO Elon Musk.

It's surely the most expensive tweet ever, as Tesla has lost $19.6 billion in value in that drop, a total that is just short of the value of Twitter as a company. As of Friday, it was at 84 cents on the dollar.

That's according to the Wall Street Journal, which spoke to sources who said the settlement for an undisclosed amount was approved by the SEC's commissioners. It would require Tesla to appoint two new independent directors.

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Musk told federal investigators that he priced shares in Tesla at $420 after claiming he was taking the company private because he thought his girlfriend would enjoy the marijuana reference.

The Department of Justice is now investigating whether to file criminal charges as well.

In a joint statement, Tesla and its board reacted late Thursday, saying they "are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century", as reported by The Washington Post.

"We believe it is important for the confidence of investors that Mr. Musk remain involved", said a note from JPMorgan Chase.

At the time, Tesla had over 800 institutional shareholders and many more individual shareholders. On Thursday, he released a statement calling the SEC lawsuit "unjustified" and said, "I have always taken action in the best interests of truth, transparency and investors".

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As it stands, Musk's future with Tesla remains unclear. The company itself wasn't targeted in the lawsuit. But Uber was under less financial pressure than Tesla.

That, in turn, could make it more hard to raise more money to stay alive, particularly in the coming months, with $1.3 billion in debt payments coming due by early next year.

"There's a 50-50 chance Musk gets removed as CEO but there's a 95% chance that he stays at the company", said Gene Munster, a managing partner at venture capital firm Loup Ventures.

"The fundamentals of Tesla have been horrendous, I don't think anybody would deny that".

For its part, Tesla's board is standing behind Musk, declaring in a statement that it is "fully confident in Elon, his integrity, and his leadership of the company". "They want to make an example out of him".

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