Elon Musk Turned Down an SEC Settlement

Elon Musk Turned Down an SEC Settlement

On Friday the stock is on track for its biggest one-day loss in nearly five years after regulators moved late Thursday to oust Chairman and CEO Elon Musk, saying his infamous tweet about taking Tesla private was securities fraud.

Given shares are down ~12% in after-market trading, consensus appears to be that Elon will be removed as CEO and chairman and may be removed from the company entirely.

On Aug. 7, Musk tweeted out he was considering taking Tesla private, and that he'd secured funding to buy shares at US$420 each - a significantly higher price than what the shares were actually trading for at the time.

In their court appeal, the SEC highlighted a few other "suggestive" Tweets reiterating his desire to transition from a publicly listed enterprise to a private one: "My hope is *all* current investors remain with Tesla even if we're private".

For the billionaire entrepreneur, it was the latest self-inflicted wound from a series of vehicle crashes that have battered Tesla's share price and Musk's reputation.

The regulator wants Musk to pay fines and any money he gained from the spike-causing tweets, and wants to remove him as CEO of Tesla.

More news: Why GOP Senators Benched Sex Crimes Prosecutor Rachel Mitchell In Kavanaugh Hearing

Aeisha Mastagni, a portfolio manager for the California State Teachers' Retirement System, a Tesla investor, said she was concerned about the board's ability to oversee Musk and the company and that she would welcome changes to Tesla's board. However, according to the WSJ, Musk's lawyers backed out of a settlement with the SEC prior to the filing the complaint. The SEC alleges he did not have the funding secured. But Musk also could agree to step down as CEO and instead take another title, such as chief production officer.

It is still possible Musk will settle with the SEC later, said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. According to Gene Munster, a managing partner of venture capital firm Loup Ventures, there's about a 25 percent chance Musk remains Tesla's CEO.

Gordon Johnson, an analyst at Vertical Group who has been predicting a collapse in Tesla's shares for months, is less optimistic.

Musk reportedly said this would compromise his character and so he backed out at the last minute, which prompted the formal charges.

The board too issued a statement in support of Musk, saying it was "fully confident in Elon, his integrity and his leadership of the company". Today's ~14 percent drop was the worst day in Tesla's history since way back in 2013.

Related Articles