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Tesla (TSLA) stock tumbles on news that SEC seeks removal of CEO Elon Musk (U: Statement)

While Elon Musk’s attempt to take Tesla (TSLA) private is long gone, it is still haunting the CEO. Now Tesla’s investors are feeling the consequences.

Tesla’s (TSLA) stock tumbled on the news that the SEC is suing Musk and is trying to remove him from the CEO position.

TSLA and Elon Musk

There have been rumors of Tesla and Musk being under a probe from the SEC and the DOJ over the way they handled the attempt to take the company private.

Specifically, they see an issue with Musk’s claim that the funding was “secured” before announcing the move. Also, they claim the price wasn’t negotiated.

Additionally, subsequent Tweets and statements by Tesla’s investor relations group are under scrutiny.

They are accusing Musk of making “a series of false and misleading statements.” The agency is reportedly holding a press conference later today about the lawsuit.

SEC Complaint

The SEC wrote in the complaint:

“Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day. He did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required.”

The stock took a 5% hit (now down by as much as 10%) in aftermarket trading after the news was reported.

Update: Elon Musk responded:

“This unjustified action by the SEC leaves me deeply saddened and disappointed. 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.”

Here’s the full complaint filed by the SEC:

[scribd id=389618439 key=key-AcCQAorHcJdja9lDuDpy mode=scroll]

This story is still developing. Keep refreshing for updates…

Electrek’s Take

As always when I comment on this stuff, I like to preface it by saying that I’m not a security lawyer and everything I say about this should be taken with a grain of salt.

Watching the take-private attempt play out and now reading this complaint, there’s no doubt in my mind that the whole ordeal was poorly handled by Musk.

That said, I don’t think his intention was to defraud anyone. He just really thought he would be able to make it happen.

I don’t know how much of an impact it should have on the case on a legal basis, but I think it is an important distinction.

Fraud requires an intent. Yet, the SEC wrote in the complaint that “Musk knew or was reckless in not knowing” that the statements he made were false.

Therefore, it sounds like the SEC doesn’t care if Musk really intended on defrauding investors and short sellers.

What do you think? Let us know in the comment section below.

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