SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

01 October, 2018, 22:54 | Author: Gerard Cortez
  • SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

The billionaire entrepreneur was fined $20m (£15m) and agreed to step down as chairman of the electric car-maker as part of the deal with the US Securities and Exchange Commission (SEC).

And while it's bad news for Musk, people on Twitter have been quick to point out how a single tweet lost the world's leading electric vehicle company its visionary chairman.

Analysts from Cowen wrote in a note over the weekend that while the settlement would likely lead to a near-term bump for Tesla shares, it could leave Musk open to future litigation - including class-action lawsuits that have already been filed.

But Musk, who is synonymous with the Tesla brand, will remain as chief executive under the settlement over tweets he posted on August 7 about taking the company private, the SEC said.

That's all on top of Tesla's hard-to-watch 2-year struggle to meet production goals on their new Model 3 (though, they did meet their Q3 goal).

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Musk has gained legions of fans for his bold approach to business and technology, using his 23 million Twitter followers account to promote Tesla, his rocket company SpaceX, and tunnel venture, the Boring Co. Along with leaving, Musk has to pay a $20 million fine for a tweet he fired off saying he planned on a massive buyout of Tesla.

The regulator stated it was charging Musk and Tesla with fraud based on "a series of false and misleading tweets about a potential transaction to take Tesla private", given that the CEO allegedly "knew that the potential transaction was uncertain and subject to numerous contingencies". Musk, 47, told employees in an email Sunday that the company was "very close to achieving profitability and proving the naysayers wrong", but still needed to execute on the last day of the quarter.

As part of the settlement with the SEC, Tesla will appoint an independent chairman, two independent directors, and a board committee to set controls over Musk's communications under the proposed agreement.

Following the announcement that Musk would settle and step down as chairman, Tesla's stock stabilised after its 14 percent drop, shooting back up 15 percent at $305 per share. Tesla has never reported a net profit and has been burning through cash since it was created in 2003.

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