Tesla Inc. (NASDAQ:TSLA) shares have plummeted on the market this morning after the Securities and Exchange Commission (SEC) officially announced that it is charging Tesla’s CEO, Elon Musk, with fraud.
Guilty?
On August 7th, Elon Musk tweeted that he wanted to take his company private. Initially, investors and analysts were divided on the matter.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
A few days later, Elon Musk published a formal announcement on the Tesla website on the matter. The CEO stated that he informed all the members of the board before tweeting out his thought. Musk claims his company held several meetings on the matter with said board members beforehand. In this meeting, the CEO explained why going private was in the best interest of the all-electric car manufacturer over the long-run.
After the meeting concluded, he was instructed to take the next steps. Musk explained:
“At the end of that meeting, it was agreed that as a next step, I would reach out to some of Tesla’s largest shareholders. Our largest investors have been extremely supportive of Tesla over the years, and understanding whether they had the ability and desire to remain as shareholders in a private Tesla is of critical importance to me. They are the ones who believed in Tesla when no one else did, and they are the ones who most believe in our future. I told the board that I would report back after I had these discussions.”
Musk felt it was necessary to tweet about the matter so that he could not only reach the larger investors but all investors of Tesla—since social media posts spread like rapid-fire nowadays.
Eventually, a company in Saudi Arabia that has been interested in funding Tesla for years backed out of the deal and Musk has been thrown to the wolves because of this.
SEC Not Happy
The SEC believes that Musk used the tweet to influence the price of TSLA shares. The day of the tweet, TSLA’s stock jumped up nearly seven percent and led to “significant market disruption.”
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“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”
The SEC’s complaint was filed in the federal district court in the Southern District of New York and alleges that Mr. Musk violated the antifraud provisions of the federal securities law.
Tesla Stock Movement
According to Yahoo Finance, TSLA shares are currently trading at $269.02, down -$38.50 (-12.52%).
