Govt agency sues Musk for fraud, wants him barred from CEO positions

28 September, 2018, 11:32 | Author: Dominic Spencer
  • Tesla chief Elon Musk

Shares of the automaker fell about 11 percent in extended trading Thursday.

Grundfest said that whether Musk can stay on as CEO is "almost entirely up to Elon" and whether he is able to negotiate a settlement with the SEC.

You can read the SEC's full 23-page complaint here.

Musk said in an August 13 blog post that the Saudi Arabian sovereign wealth fund was interested in financing Tesla, only to later shelve any plans to take the company private in a tweet on August 24 .

It also claims he "knew or was reckless in not knowing" that his statements were false and/or misleading.

The legal suit filed claims Mr Musk "falsely indicated that it was virtually certain that he could take Tesla private" at a purchase price higher than Tesla's then stock price.

That news sent shares soaring.

An unnamed Wall Street analyst emailed Tesla's head of investor relations following the blog post noting that it didn't address Musk's assertion in his tweet that funding had already been secured for the buyout.


The US Securities and Exchange Commission's lawsuit seeks to bar Musk from serving as an officer or director of a public company, which would potentially remove him from his roles as chief executive officer and chairman of Tesla.

After the initial tweet, Musk posted subsequent tweets and reemphasized his intention to take the firm private, and the SEC cited those additional tweets in its complaint as additional misleading statements. Tesla has been a publicly traded company since 2010.

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 goal fund" could be created, and he hadn't received "confirmed" support for the proposed transaction.

Musk also tweeted that he had "funding secured" for such a deal and that the only step left in the process was getting investor approval. Musk said moments later on Twitter that the only remaining contingency was a shareholder vote, when, the lawsuit alleges, there were many more contingencies.

In a lawsuit, the regulator said Musk surprised members of his own team and investors with a series of tweets, starting with the August 7 announcement that he was thinking oftaking Tesla private. Among other things, Musk is said to have ignored the advice of his investor relations department which said it would be hard for retail investors and smaller shareholders to remain invested in the company.

"This sucks", said Ross Gerber, president and CEO at Gerber Kawasaki Inc, which owns 41,000 Tesla shares.

In a statement released late Thursday, Tesla and the Palo Alto, California-based company's board said they are fully confident in Musk, his integrity and leadership.

Following that morning's tweets, Tesla stock rallied 6 percent before trading was halted for more than an hour.

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