TESLA WITHOUT MUSK AT THE WHEEL? QUITE LIKELY
This unjustified action by the SEC leaves me deeply saddened and disappointed. Integrity is the most important value in my life and the facts will show I never compromised this in any way — Elon Musk
The lesson for CEOs is that the rules apply to everyone including highly successful visionaries — Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware
detriot — Tesla without Elon Musk at the wheel? To many of the electric car maker’s customers and investors that would be unthinkable. But that’s what government securities regulators now want to see.
The Securities and Exchange Commission has asked a federal court to oust Musk as Tesla’s chairman and CEO, alleging he committed securities fraud with false statements about plans to take the company private.
The agency says in a complaint filed on Thursday that Musk falsely claimed in an August 7 statement on Twitter that funding had been secured for Tesla Inc. to go private at $420 per share, a substantial premium over the stock price at the time.
An SEC press release says the agency asked the US District Court in Manhattan for a “bar prohibiting Musk from serving as an officer or director of a public company.” It also is asking for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties. Ousting Musk, who has a huge celebrity status with more than 22 million Twitter followers, would be difficult and could damage the company. —
bengaluru — Shares of Tesla dived 13 per cent on Friday as Wall Street worried a lawsuit from US regulators could force chief executive Elon Musk to step down and make it difficult for the loss-making carmaker to raise more capital.
The US Securities and Exchange Commission on Thursday accused Musk of fraud and sought to remove him from his role saying he made a series of “false and misleading” tweets about potentially taking the company private. At least five brokerages who follow Tesla stock said in research notes that they thought Musk might have to resign.
Several worried that the SEC action was
also just the beginning of a legal battle with authorities, short sellers and other investors over Musk’s actions that could cost Tesla heavily.
“The SEC civil action may lead to Musk’s exit from Tesla (either permanently or temporarily) and the Musk premium in the shares dissipating,” Barclays analyst Brian Johnson said.
Musk, 47, is the public face of Tesla, and has driven it to the verge of profitability with a costly rampup of production of its Model 3 sedan over the past year.
The Silicon Valley billionaire, who within three weeks of the tweets had abandoned the plan to delist Tesla, said overnight he had done nothing wrong and the company’s board reiterated its support for him.
“It will be too damaging to Tesla for him to be removed fully,” analyst Ivan Fienseth from Tigress said.
“In order for Tesla to raise money I think investors will want Musk to stay involved but have more controls in place.”
Shares were last down 12.4 per cent at $268 in trading before the bell in New York, which would wipe about $7 billion off Tesla’s market value.
Gene Munster, managing partner at venture capital firm Loup Ventures, said the lawsuit adds
It will be too damaging to Tesla for [Musk] to be removed fully. In order for Tesla to raise money I think investors will want Musk to stay involved but have more controls in place Ivan Fienseth, Analyst at Tigress
further distraction at a critical six-month juncture in the company’s viability.
“Despite this, we think the company will survive,” he said.
The SEC’s lawsuit, filed in Manhattan federal court, caps a tumultuous two months set in motion on August 7 when Musk told his more than 22 million Twitter followers that he might take Tesla private at $420 per share, with “funding secured”.
The regulator charged that Musk “knew or was reckless in not knowing” that his tweets were false and misleading.
Jeffrey Osborne, an analyst at brokerage Cowen, said investing in Tesla equity and bonds over the past few weeks had been “a game of choose your own adventure”.
“The ball is in the board’s court now and it remains to be seen what will happen next,” Osborne said. —