Forget the British Diver, Here's Real Trouble - SEC Hits Elon Musk With Fraud Suit

Steph Willems
by Steph Willems
forget the british diver heres real trouble sec hits elon musk with fraud suit

Documents filed in a Manhattan federal court Thursday reveal the U.S. Securities and Exchange Commission is suing Tesla CEO Elon Musk for fraud. The SEC opened an investigation into Musk after the CEO fatefully tweeted his intent to take the company private. “Funding secured,” Musk wrote in the August 7th tweet.

The go-private plan quickly fell apart. In the lawsuit, published by Bloomberg, the SEC accuses Musk of fabricating the claim made to 22 million social media followers, many of them investors.

“Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day,” the SEC wrote. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source.”

In a later blog post, Musk claimed Tesla had engaged in talks with Saudi Arabia’s sovereign wealth fund, which was seen as a potential backer for the multi-billion share buy-up plan. Still, no details on secured funding arose. The Saudis later said this wasn’t their style of investment, and later announced $1 billion in funding for a startup Tesla rival. As it grew increasingly obvious that the statement didn’t have legs, the automaker’s share price plummeted. Investment banks were called in to seek the necessary funding before Musk pulled the plug on the plan.

Lawsuits from several investors rolled in around the same time the SEC investigation kicked off. Earlier this month, word of a Department of Justice probe broke in the media. While Musk is allowed to take his publicly traded company private, protocol demands that he announce his intent in a proper fashion to avoid blindsiding investors and traders.

“He did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet,” the lawsuit states. “He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required.”

It continues:

“According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a ‘standard premium’ in going-private transaction. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price.'”

If the SEC gets its way, Musk will find the levers of power pulled from his grasp. The lawsuit seeks an order barring him from serving as an officer or director of a public company.

Tesla’s stock, already weakened by the shenanigans of the past month, plunged in after-hours trading, hitting $275.72 per share at 5 p.m. On the day of the Tweet That Started It All, Tesla’s stock closed at $379.57.

Comments
Join the conversation
6 of 58 comments
  • EquipmentJunkie EquipmentJunkie on Sep 28, 2018

    Following Musk over the last year has been a real soap opera. The twists and turns of the Tesla plot have been better than TV. Along those lines of watching the unthinkable, the thought occurred to me that this could have been an intentional means for Musk to escape his "deep production hell" that he found himself navigating. He could say that "The Man" took him out. Not likely a possibility, but we are dealing with a tiger of a different stripe with Musk. I keep coming back to a point that I have thought of for years and others have stated repeatedly, "With Musk's vast resources, why not go find the world's best automotive plant managers and durable goods supply chain managers and pay them 'I couldn't say No' money?" Perhaps I'm just too grounded in reality.

    • See 2 previous
    • SCE to AUX SCE to AUX on Sep 28, 2018

      @EquipmentJunkie: Tesla hired those experts, but they've been micromanaged by Mr Musk. Eventually, they leave.

  • Ernest Ernest on Sep 28, 2018

    The SEC has no sense of humor for this kind of thing. Just ask Martha Stewart how shallow their humor is.

    • APaGttH APaGttH on Sep 28, 2018

      Awwww, she was just kidding. She's a kidder.

  • Cprescott The pandemic changed the sales game. No longer do dealerships need inventory. After two years people are accustomed to having to order what they want and then extorted on the price by the dealer for that privilege. Now used cars with 75k are selling for $5k more than I paid for my 21k, 2016 model back in January 2019. I pray my car won't get totaled and I have but 13 payments left to make on it. I may never buy another car again.
  • Grein002 I hope you meant "take the Ranger out behind the *barn*" rather than "bar". I think something completely different happens "behind the bar".
  • Cprescott Suddenly there is no reason to buy ugly anymore. The Silverdodo is dead. Long live the less hideous Colorado.
  • Cprescott Portable BBQ's for everyone!
  • Lou_BC The 2023 ZR2 is burdened with GM's 8 speed. It's been allegedly "fixed" so it doesn't gear hunt and shudder. I still won't trust it. The turbo 4 cylinder should address the lack of torque found in the V6. I test drove a full-sized Trail Boss. I could make it gear hunt. The turbo 4 didn't seem to be lacking in power, at least for an empty crewcab with a 6.5 box. It lacked anything resembling character. It had next to zero compression braking even with tow/haul engaged. Chevy should have continued offering the VM Motori based inline 4 diesel that's in the older Colorado trucks. I do like the fact that the 2023 comes with 33's standard and IIRC the wheel hubs/axles etc. have been beefed up to handle the larger rubber. The bolt pattern (IIRC) is shared with fullsized 1/2 tons opening up one's choice for aftermarket wheels.
Next