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Why Tesla Stock Was Slammed Friday

30 September, 2018, 01:03 | Author: Melinda Barton
  • Media playback is unsupported on your device                  Media caption Who is Elon Musk

Things are looking downright messy right now for Elon Musk and Tesla following a lawsuit by the Securities and Exchange Commission on Thursday accusing the CEO of securities fraud for his infamous "funding secured" tweet about taking the automaker private.

Tesla plunged as much as 14 percent in early trading Friday after the U.S. Securities and Exchange Commission alleged that Musk committed fraud by tweeting last month that he'd secured funding to take the company private.

The 47-year-old entrepreneur, accused by regulators of misleading investors in Tesla with an August tweet about taking the company private - thought he, indeed, had a verbal agreement with a deep-pocketed lender, according to a report Friday evening.

Perhaps no chief executive is more inextricably linked to his company as Elon Musk is to Tesla.

Musk's fans maintain that Tesla would be insane to get rid of him, arguing it would go down as a huge mistake similar to the one Apple made in 1985 when it ousted its own visionary founder, Steve Jobs, only to bring him back with the company on the brink of bankruptcy 12 years later.

Musk stated on Thursday that the SEC's allegations were "unjustified" stating: "I have always taken action in the best interests of truth, transparency and investors".

SEC's complaint held that Musk fabricated the August claim, causing Tesla's shares to rise since he had not really confirmed the key terms and conditions of the deal with any potential funder.


Gordon Johnson, an analyst at Vertical Group who has been predicting a collapse in Tesla's shares for months, is less optimistic. Only the shareholders' assent was needed, he said.

The SEC is asking a federal court in NY to bar Musk from serving as an officer or director of any public company.

There were bumps in the road, like when Musk snapped at analysts during a company conference call and when he attacked a British diver who had helped rescue children who were trapped in a cave in Thailand. The company may need to find more than US$1-billion to repay convertible debts that come due in the next few months.

A newly installed vehicle charger at a Tesla Super Charging station is shown in Carlsbad, California, U.S. September 14, 2018.

Share value in Tesla is down more than 11.6 percent on the day, trading at $271.75 as of this writing.

The court documents obtained by TMZ, contends that his Twitter escapade was done in haste, while he was holding preliminary discussions with confidantes falling outside Tesla's board of governors. Based on the leak, it seems the program will be running throughout the next year or so; it's unclear when Tesla plans to enable the fully autonomous capability.

"Usually, if there is a criminal investigation, most people wait for that shoe to drop", Thomas Gorman, a partner at law firm Dorsey & Whitney and a former SEC senior counsel, told The Post.

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