Regulator hits turbo mode over Tesla

The speed with which US financial regulators have filed a case against Tesla is a match for the electriccar maker’s own “ludicrous mode” acceleration. Weeks after serving the company with a subpoena, the Securities and Exchange Commission (SEC) is suing boss Elon Musk for misleading investors.

This is seriously fast work. SEC inquiries often take years. Musk’s infamous tweet claiming that he had secured funding to go private was sent in August. But the SEC already had its eye on the company following claims that it was obfuscating production problems.

The SEC alleges Musk committed securities fraud by making a series of false and misleading statements. He had not lined up the financing required to buy out Tesla shares at $420 and so may be forced to relinquish his roles as chair and CEO. Musk called the SEC’s action “unjustified”.

Fervid supporters will argue that the company cannot survive without Musk’s boisterous leadership.

Musk’s own brand is baked into the company’s value. Even after taking into account the 14% fall in Tesla shares in after-hours trading, its market capitalisation remains larger than Ford’s.

Regulatory oustings are rare. Elizabeth Holmes was banned from serving as an officer or director of a public company for a decade after her medical start-up Theranos was discovered to have fabricated results. But most cases are settled.

If Musk does go, investors can console themselves by looking at what has happened to Uber following CEO Travis Kalanick’s forced departure. Without his antagonistic stance towards regulators, the company’s route to public markets has been smoothed. If a more conservative boss can be found, Tesla shareholders may find that a CEO who does not pick buyout prices because his girlfriend will find them funny, as SEC’s filing suggests Musk did, or complain that queries about margins kill them, will do the stock good in the long run. London, September 28