The Securities and Exchange Commission sued Tesla CEO Elon Musk Thursday in a civil lawsuit, charging him with lying when he tweeted that he had “funding secured” to take the electric car company private, USA Today reported.
Credited with revolutionizing transportation on Earth and in space, Musk’s auto manufacturing company Tesla Motors, brings fully-electric vehicles to the mass market. His Model 3 car retails for $35,000 and up.
The lawsuit could damage the public company financially, harm investors and result in Musk’s removal as leader of the Silicon Valley-based firm he founded in 2003. In addition to financial penalties, the SEC is asking the federal court to block Musk from leading a public company or serving on the board of one, which would require him to leave Tesla.
The SEC charges focus on a series of tweets where Musk told his 22 million Twitter followers that he was considering a multi-billion dollar transaction that would take Tesla private at $420 per share, a significant premium to the price at the time.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Between Musk’s first tweet and the close of trading on Aug. 7, Tesla shares gained more than 6 percent in value on increased volume, the complaint said.
Company shares fell 11 percent in extended trading Thursday — 30 percent below Tesla’s 52-week high of $387.46, CNBC reported.
Tesla has developed technology that it hopes will transition the world to sustainable energy with electric cars, solar panels and integrated renewable energy.
Musk ranks No. 25 on the Forbes list of Most Powerful People in 2018, and No. 54 on the Billionaires list, 2018.
Born and raised in South Africa, Musk immigrated to Canada at age 17 before moving to the U.S. as a transfer student at the University of Pennsylvania.
The SEC alleges that Musk made “false and misleading” statements and did not properly notify regulators of material company events.
If he’s found guilty, the SEC wants Musk barred from serving as an officer or director of a publicly traded company:
“We allege that Musk’s statements were false and misleading because they lacked any basis in fact,” said Stephanie Avakian, co-director of the SEC’s division of enforcement, during a press conference.
“A chairman and CEO of a public company has important responsibilities to shareholders,” “Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as a press release or an earnings call or through less formal methods such as Twitter or other social media.
“Neither celebrity status, nor reputation as a technological innovator provide an exemption from the federal securities laws.”
Musk said in a statement that the allegations are unjustified and he never compromised his integrity:
“This unjustified action by the SEC leaves me deeply saddened and disappointed,” Musk told CNBC. “I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
Musk and Tesla have a history of skirting traditional operational standards and spinning negative press, said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, in an email to USA Today.
The co-founder of PayPal, Musk scored a huge payday when eBay the business for $1.4 billion in 2002. His rocket company, SpaceX, is valued at $20 billion-plus.
Musk is widely known for his combative style in corporate America, USA Today reported. He may seek a deal, mount a fiery defense, or do something in between.
“In the worst case there will be a settlement with some penalty to Elon Musk,” predicted Trip Chowdhry, managing director of equity research at Global Equities Research, in an email to USA Today.