Electric car maker Tesla and its chief executive Elon Musk face yet more turmoil after it emerged that the US Securities and Exchange Commission is seeking Musk’s removal from the firm.
In an extraordinary lawsuit, the US financial regulator has accused Musk of securities fraud, and alleges he made a series of “false and misleading” tweets about potentially taking Tesla private last month.
Musk has already been hit by two lawsuits over Musk’s announcement over Twitter in August that he was considering taking the company private. Those lawsuits accuse Musk of a fraudulent effort to attack short sellers (financial traders Musk has previously criticised).
But the news that the US financial regulator is now seeking the removal of Musk as head of the electric car company will no doubt deeply concern investors.
According to Reuters, in the SEC lawsuit, the regulator described Musk as surprising members of his own team and investors with a series of tweets, starting with the 7 August announcement that he was thinking of taking Tesla private.
Twelve minutes after the first tweet, Tesla’s head of investor relations texted Musk’s chief of staff to ask whether Musk’s announcement was “legit”, the SEC reportedly said.
The US financial regulator also said that Musk’s claims that he had secured funding to take the electric carmaker private were “false and misleading”.
Shares in Telsa had soared after his initial tweets, helped when Musk said the move, would involve a record $72 billion (£56bn) deal valuing Tesla shares at $420, would also remove the distraction of share price swings and the expectation of meeting quarterly targets.
He said funding had been “secured”,
But later in the month Telsa’s then slumped after Musk backed away from the privatisation, citing investor feedback.
The SEC is now said to be seeking to ban Musk from acting as an officer or director of a publicly traded company.
The Department of Justice meanwhile (which itself can file criminal charges), has also apparently opened a criminal inquiry over Musk’s tweets.
The news of the SEC lawsuit sent Telsa shares tumbling 12 percent in after-hours trading, according to Reuters.
But Musk is not taking the lawsuit lying down and he insisted he had done nothing wrong.
“This unjustified action by the SEC leaves me deeply saddened and disappointed,” Musk said in a statement. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
More importantly perhaps, Tesla’s board said they are “fully confident” in Musk.
Musk, 47, is the public face of Tesla and the move by the SEC to bar Musk as an officer of any public company is a rare move against the CEO of such a well-known firm.
Musk’s tweets have also resulted in other legal action after he
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