Tesla shares plunge as SEC seeks Elon Musk resignation
SHARES in Tesla plunged 13pc last Friday after US securities regulators accused Elon Musk of fraud and sued to have him banned from the leadership of the electric car-maker, although sources said the high-tech billionaire could still reach a settlement.
Musk, Tesla’s chairman and chief executive, has been directly involved in almost every detail of its product development and technology strategy, and is credited as the driving force behind the loss-making company’s ability to raise capital.
The cost of insuring Tesla debt against default rose to its highest price ever last Thursday and the plummeting share price attracted new short sellers, who bet against the stock.
Short sellers notched $1.27bn (€1.1bn) on Thursday alone in paper profits, and Tesla recently regained the title of most-shorted US stock, according to S3 Partners.
The US Securities and Exchange Commission (SEC) accused Musk of tweeting false and misleading information in August about financing for his now-abandoned plan to take the company private, and said it was seeking to remove him as an officer or director. Musk said he had done nothing wrong and the company’s board said it supported him. Musk (47) walked away at the last minute from a settlement with the SEC that would have required him to give up key leadership roles at the company for two years and pay a nominal fine, according to reports yesterday.
But sources, who requested anonymity because they were not authorised to discuss the matter publicly, told Reuters that while Musk was ready to go to trial, he could still settle. They did not discuss possible terms.
CNBC reported that Musk had turned down an SEC deal to give up his role as chairman, while Fox Business News reported that Musk had been offered a temporary ban as CEO.
Musk has hired Stephen Best at Brown Rudnick, who successfully defended internet billionaire Mark Cuban in an insider trading case, according to people familiar with the plans who also asked not to be identified. He also hired former Assistant US Attorney Chris Clark of Latham & Watkins to defend him in the case, the people said. Tesla did not immediately respond to a request for comment. The SEC declined to comment on the settlement reports.
One person with knowledge of the SEC’s thinking said that the SEC lawsuit or a potential settlement did not preclude further action by the Justice Department.