THE FALL OF TESLA
Elon Musk’s future in doubt after fraud charge sends shares down 15pc
SHARES in Tesla plunged 15pc last night, wiping about £6bn off the company as founder Elon Musk fought for his future following fraud charges.
Investors dumped stock in the electric car maker after Musk was accused by US authorities of falsely claiming in a tweet that he had secured funding to take the firm private.
If found guilty, the billionaire entrepreneur would face a ban from running public companies and could be jailed.
Musk is said to have turned down an offer to settle with the authorities which would have seen him avoid charges.
Analysts are warning he could be forced out of the company, which he built from nothing into business worth as much as £50bn in just 15 years.
Shares have fallen from nearly $380 early last month to around $260 last night. It is feared the crisis engulfing the company and its founder could send them down to $140.
Musk’s fall from grace is a victory for short sellers who have spent years betting that Tesla’s share price would collapse. Bill Smith of Blaine Capital, which is shorting Tesla shares, said: ‘Musk should be gone, he should have gone a long time ago. Musk is a liar. He is willing to do or say anything at any time to keep the stock elevated.’
Musk stunned markets last month when he tweeted about a plan to take Tesla private at $420 a share – adding: ‘Funding secured.’
It sent the share price soaring 13pc, and Musk later said he expected backing from Saudi Arabia’s sovereign wealth fund after informal talks.
But there was immediate concern behind the scenes at Tesla, and the firm’s head of investor relations even texted Musk to ask if the tweet was legitimate.
Musk’s claim was investigated by the US Securities and Exchange Commission, which concluded it was false and misleading and as a result has charged him with fraud.
The SEC claims Musk had not lined up backers and that he predicted the $420-per- share price based on a 20pc premium to the previous day’s closing rate, because he thought this would be the typical uplift paid by a bidder taking a firm private. This calculation came out at $419.
The SEC allege that Musk upped it to $420 because the number is code in marijuana culture referring to the consumption of the drug, and he thought his girlfriend, Canadian singer Grimes, would find it funny.
The South-African born 47year- old – who was filmed on a podcast smoking a cannabis joint earlier this month – has seemed increasingly erratic.
He is being sued after calling a British diver who helped rescue Thai boys trapped in a cave a ‘child rapist’ and admitted last month that he is working 120hour weeks and using sedatives.
But Tesla devotees believe he is a visionary and vital to the company’s future.
Barclays has warned that if Musk is forced to leave, it will send Tesla shares down another $130 – or 48pc from their current level. Analysts at the bank said: ‘The SEC civil action may lead to Musk’s exit from Tesla, either permanently or temporarily, and the Musk premium in the shares dissipating.’
Other banks, such as Citigroup, have downgraded the stock on fears of further turbulence.
It was claimed Tesla was close to reaching a deal with the SEC before it brought charges against Musk. Sources told CNBC the agreement would have seen Musk and Tesla pay a nominal fine and he would not have been required to admit guilt.
However, he would have been barred from serving as chairman for two years and Tesla would have been required to appoint two independent directors.
It is claimed that Musk refused to sign at the last minute because he felt this would not have been truthful to himself.
The two sides could potentially still reach a settlement in coming weeks. But Musk has vowed to fight the charges.
He said: ‘This unjustified action by the SEC leaves me deeply saddened and disappointed.’