World News
U.S. regulator sues Musk for fraud, seek to remove him from Tesla
NEW YORK/SAN FRANCISCO, (Reuters) - The U.S. Securities and Exchange Commission yesterday accused Tesla Inc Chief Executive Elon Musk of fraud and sought to remove him from his role in charge of the electric car company, saying he made a series of “false and misleading” tweets about potentially taking Tesla private last month.
Musk, 47, is the public face of Tesla and losing him would be a big blow for the money-losing car maker which has a market value of more than $50 billion, chiefly because of investors’ belief in Musk’s leadership.
The Department of Justice, which has the authority to press criminal charges, has also questioned the company about Musk’s tweets, the company said this month.
Tesla shares tumbled 12 percent in after-hours trading.
“Elon is Tesla and Tesla is Elon and that’s great when Elon is scoring touchdowns and grand slams but not so great when there are negative things tied to him,” said Karl Brauer, executive publisher at car research firm Kelley Blue Book.
Musk said he had done nothing wrong. “This unjustified action by the SEC leaves me deeply saddened and disappointed,” he said in a statement. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
Tesla’a board said they are “fully confident” in Musk.
The SEC’s lawsuit, filed in Manhattan federal court, caps a tumultuous two months set in motion on Aug. 7 when Musk told his more than 22 million Twitter followers that he might take Tesla private at $420 per share, with “funding secured.”
On Aug. 24, after news of the SEC probe had become known, Musk blogged https://www.tesla.com/blog/ staying-public that Tesla would remain public, citing investor resistance.
The Wall Street Journal reported on Thursday that the SEC filed the lawsuit after a proposed settlement with Musk fell apart. The SEC did not immediately respond to a request for comment late on Thursday.
In its lawsuit, the SEC said Musk calculated the $420 price per share based on a 20 percent premium over that day’s closing share price and because of the number’s slang reference to marijuana. The lawsuit, which cites emails and text messages between Musk and Tesla executives, quoted Musk as saying he thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price.”