Elon Musk sued by United States securities regulator over Tesla shares tweet

Adjust Comment Print

The SEC held a press conference where it charged Musk with fraud and announced it would seek to prevent him from serving as an executive or director of a publicly traded company.

The tweet sparked a share frenzy, with prices climbing as much as 11pc after the Tesla chief sent it for his 22m Twitter followers to read. Losing its public face and guiding force would be a big blow for money-losing Tesla, which has a market value of more than $50 billion, chiefly because of investors' belief in Musk's leadership. 'I have always taken action in the best interests of truth, transparency and investors. "Funding secured." Shares rose 11 per cent and trading volume spiked.

January 2017: Musk first meets with a sovereign investment fund-the SEC does not specify which one, but according to numerous reports, it is Saudi Arabia's sovereign wealth fund, so we will refer to it as the Saudi fund. Musk took that to mean he was proposing a "standard" going-private transaction, but the terms were not discussed.

Tesla stock spiked on Musk's tweet, closing up almost 11 percent from the previous day, the SEC said. The price had rebounded to $307 by the end of today's trading session, in part due to Tesla's vigorous effort to deliver Model 3 cars as its financial quarter comes to a close.

More news: Donald Trump says his past accusers influence thinking on Brett Kavanaugh

Fund representatives expressed interest in taking Tesla private and asked about building a factory in the Middle East, Musk told the SEC.

Tesla's market capitalisation has soared to well beyond $US50 billion - and on occasions has overtaken both GM and Ford as the biggest auto manufacturer by value in the United States, despite it only having a fraction of the sales.

The SEC says in its complaint that Musk violated Section 10 (b) of the Securities Exchange Act of 1934, and that they feared he would continue to make such problematic statements.

The company is also facing several shareholder lawsuits over Musk's statements alleging fraud or market manipulation, as well as whistleblower complaints that Musk had lied to investors about the company's production.

More news: Read Christine Blasey Ford's written testimony to Senate

In total, Tesla stock has fallen about 28% since Musk's August 7 tweet.

The SEC filing said funding was not secured because Musk had never discussed it with any potential financial sources, he had never investigated whether the "special objective fund" could be created, and he hadn't received "confirmed" support for the proposed transaction.

"Elon, am sure you have thought about a broader communication on your rationale and structure to employees and potential investors", Ahuja texted Musk 35 minutes after he dropped his bombshell on Twitter.

The SEC doesn't have criminal enforcement powers, so this lawsuit's outcomes are limited to fines, a temporary ban on being a company bigwig or - most severely - a permanent ban.

More news: Brett Kavanaugh Refuses To Say Whether He'd Want Mark Judge To Testify