SEC sues Musk, seeks his ouster for Tesla buyout tweets in August
NEWYORK/WASHINGTON: Tesla Inc.’s board backed embattled chief executive officer (CEO) Elon Musk after the US Securities and Exchange Commission (SEC) sued the billionaire for his explosive August tweet about a buyout of the electric-car company he founded.
The SEC is seeking unspecified monetary penalties and, more importantly, will ask a judge to bar Musk from serving as an officer or director of a public company, the agency said in a lawsuit filed in New York. Musk misled investors by claiming falsely that he had lined up funding for the transaction, the suit alleged.
Tesla and its board “are fully confident in Elon, his integrity, and his leadership of the company”, they said in a joint statement on Thursday. “Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.”
The prospect of Musk losing control of Tesla unnerved investors already worried about the company’s ability to produce cars fast enough to start generating profits. They dumped the stock, driving it down 10% in pre-market trading and deepening a sell-off that began as the go-private gambit quickly unraveled in August.
“Musk’s statements were false and misleading,” Stephanie Avakian, co-director of the SEC’S enforcement division, said at a press conference in Washington. “They lacked any basis in fact.”
In the lawsuit and at the news conference, the SEC officers went to great lengths to spell out the Tesla CEO’S carelessness and his erratic behaviour—from threatening to “burn” short-sellers who targeted Tesla stock to seeking to amuse his girlfriend, the pop singer Grimes, by weaving in a “marijuana culture” reference to his go-private bid. (He set a buyout price of $420, a number he landed on in part because it’s code for marijuana consumption.)
Musk, a serial entrepreneur whose name is synonymous with Tesla, called the lawsuit “unjustified” and said it left him “deeply saddened and disappointed”. “I have always taken action in the best interests of truth, transparency and investors,” he said in a statement.
Tesla, based in Palo Alto, California, wasn’t named in the SEC suit.