Tesla shares fall 14% on Musk worries

It’s nearly impossible to imagine Tesla without Elon Musk, its chairman, CEO, largest shareholder and public face.

But a U.S. Securities and Exchange Commission lawsuit has raised questions about the executive’s future at the cleanenergy company, sending shares spiraling. The agency accuses Musk, 47, of misleading investors with his Aug. 7 tweets about taking Tesla private. The two sides reportedly came close to a settlement before Musk backed out and the SEC filed a complaint seeking to ban him from serving as a director or officer.

That possibility, however remote, casts a pall on the final days of a rocky quarter and is likely to renew concerns about Tesla’s lack of an operating chief or other clear No. 2. This weekend was supposed to be one for celebratory milestones, with thousands of Model 3 sedans finally making their way to customers at delivery centers across the country as the company makes a final push to achieve sustainable profits. Instead, drama surrounding Musk is once again taking center stage.

“If Elon Musk resigns or is not the CEO, Tesla is a fundamentally different company that is less attractive to us,” said Ross Gerber, chief executive officer of Gerber Kawasaki in Santa Monica, Calif., which holds Tesla stock.

Tesla shares slumped 14 percent to $264.77 on Friday.

Musk pulled out of a settlement with the SEC in which he and Tesla would have had to pay a nominal fine, CNBC reported, citing sources it didn’t identify. While the CEO wouldn’t have had to admit any guilt, Musk would have been barred from being chairman for two years, and Tesla would have been required to appoint two new independent directors, CNBC said.

Aside from the drama surrounding Musk’s tweet saying Tesla may go private — and his decision less than three weeks later to stay public — the company has been grappling with the departure of several top executives. The Justice Department has also opened a fraud investigation.

Tesla and its board “are fully confident in Elon, his integrity, and his leadership of the company,” directors said in a joint statement Thursday. “Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.”

Tesla has recently emerged from months of what Musk called “production hell” and now finds itself in what he’s said is “delivery logistics hell.” The company is in a race to get its key Model 3 vehicles to customers by the end of the third quarter, which will likely lead to “huge” sales figures just as some investors flee with the SEC suit, Gerber said.

Musk was uncharacteristically silent on Twitter on Thursday, but said in an emailed statement that “this unjustified action by the SEC leaves me deeply saddened and disappointed.” Tesla’s board, which includes Musk’s brother Kimbal Musk, is closely aligned with the CEO. The company itself wasn’t targeted in the lawsuit.

“This was clearly a selfinflicted wound and it comes at a time that is critical for Tesla, which doesn’t need any more challenges,” said Michelle Krebs, senior analyst with researcher Autotrader. “They’re under financial pressure to turn things around and facing an onslaught of new competitors.”

Earlier this year, shareholders rejected a proposal to split Musk’s role as chairman and CEO and awarded him an unprecedented compensation package that paves the way for him to stay at the company.