By Prarthana Mitra
After announcing his intent to take Tesla private on Twitter again, eccentric billionaire and tech entrepreneur Elon Musk found himself in a precarious position with the US Securities and Exchange Commission (SEC).
The regulatory body on Thursday decided it has had enough of Musk’s erratic business decisins, and has consequently charged the Tesla CEO with a lawsuit claiming securities fraud and seeking to ban him from running companies. Tesla, however, was not named in the suit.
Here’s what happened
After Musk first tweeted about his endeavours to privatise Tesla in August, at $420 a share, there was a huge spike in Tesla’s share price. Tesla’s share price closed up nearly 11% on August 7, causing Nasdaq to suspend trading for an hour and a half. Shortly after, Musk abandoned the project, refusing to justify the hairpin move or apologise for tweeting a falsely indicated plan, which the SEC claims is potentially against the law. If his claims to have secured funds to take Tesla, private, are found to be unsubstantiated, then it would implicate Musk for trying to erroneously drive Tesla’s stock prices up, especially now that the SEC considers his tweets “false and misleading” for the investors.
Moreover, Musk has reportedly not discussed it with members of his board or prospective funders, even when he later decided to call it off. Stephanie Avakian, the SEC’s co-director of enforcement, told the press that he “had not even discussed key deal terms, including price with any potential source of funding”, nor notified Nasdaq which is required by law. In fact, according to sources in the SEC, Tesla’s investor relations department were compelled to contain the fallout by falsely assuring investors that the matter was effectively a “done deal”, until Musk tried to walk back on his own tweet, By August 27, it was clear that the done deal was done for good.
Career in potential jeopardy
Musk’s online habits and appearances have been under massive scrutiny recently and he has made headlines for infamously smoking weed on a live webcast and launching himself in verbal abuse against a British diver who was rescuing the children trapped in the Thai cave.
Now he stands to lose control over the electric car company he founded along with enterprises like The Boring Company, as the SEC now seeks unspecified monetary penalties, returns from his ill-gotten gains and a ban on Musk from owning or serving on the board of a publicly-traded company.
Amidst rising concern and conspiracy theories about his mental health, Musk has dismissed the SEC’s allegations as baseless on Thursday, vowing to defend himself.
“This unjustified action by the SEC leaves me deeply saddened and disappointed,” he is reported to have said in a statement. “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,” reaffirming his eponymous self-confidence in his business acumen. As Tesla continues to struggle to meet Musk’s ambitious production targets, the CEO’s tweets and shenanigans are taking a further toll on the company’s image and market value. The company stands at $307.52 per share after the lawsuit hit the newsstands.
Prarthana Mitra is a staff writer at Qrius.
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