Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Tesla, Inc. founder and CEO Elon Musk, accusing him of fraud because of a series of “false and misleading” tweets he made in
August about taking Tesla private.
SEC also wants Musk fired from his post as Tesla CEO and bar Musk as an officer of any public company. Its lawsuit also seeks to impose only a civil fine and other remedies because it doesn’t have criminal enforcement power. SEC said Musk will remain Tesla CEO until the lawsuit is settled legally.
Musk immediately protested, claiming he’d done nothing wrong. He blasted the SEC actions as “unjustified.” He also said these moves 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.”
On Aug. 7, Musk told his more than 22 million Twitter followers he might take Tesla private at $420 per share, and there was “funding secured.” He admitted to having met with Saudi Arabian investors on July 31, but had not secured a firm investment commitment from them by the time of the Aug. 7 tweet.
Publicly-traded Tesla, the world’s largest maker of electric cars, has a market cap of more than $50 billion, chiefly because of investors’ belief in Musk’s leadership (often erratic) and his visionary pronouncements.
Filed in Manhattan federal court, the SEC lawsuit alleges Musk calculated the $420 price per share of Tesla based on a 20 percent premium over that day’s closing share price, and because of the number’s slang reference to marijuana. It quoted Musk as saying he thought his girlfriend would find it funny.
According to the SEC, Musk “knew or was reckless in not knowing” that his tweets about taking Tesla private at $420 a share were false and misleading, given that he’d never discussed such a transaction with any funding source.
The SEC said Musk met for less than an hour with three representatives of Public Investment Fund (PIF), a Saudi Arabian sovereign wealth fund, on July 31. The PIF representatives indicated an interest in taking Tesla private if the terms were “reasonable,” said the lawsuit, and this was about it.
Musk acknowledged the meeting lacked discussion of “even the most fundamental terms” of the deal. He also said nothing was set down in writing. Musk, however, didn’t talk to the PIF representatives again until three days after his tweets.
“This sucks,” said Ross Gerber, president and CEO at Gerber Kawasaki Inc, which owns 41,000 Tesla shares. “Don’t think this has ever happened to a CEO before. Have no idea where this will go.”
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