The Securities and Exchange Commission charged Elon Musk, Chief Executive Officer and Chairman of Tesla Inc. (NASDAQ: TSLA), with securities fraud for a series of misleading and false tweets regarding his previous actions to take Tesla private. Shares plummeted by 11.4% during after hours on Thursday.
The SEC cited Musk’s tweet back in early August about taking his Company private at USD 420.00 per share, causing shares to surge at the time. He told his followers and investors on the social media platform that the Company has secured funding, despite the numerous allegations saying he hasn’t.
At the end, Musk released a statement that in the interest of the Company and its investors, Tesla will remain public. His decision at the end caused concern and doubt regarding his original decision to possibly take the electric car manufacturer private, which led the SEC to investigate into the situation.
The SEC alleges that Musk had not discussed specific deal terms with any potential financing partners and that he allegedly knew that the transaction was uncertain and subject to multiple contingencies.
The SEC also notes that his series of tweets caused Tesla’s share prices to jump by 6%, causing a disruption in the market.
“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 complaint alleges that Musk violated antifraud provisions of the federal securities laws and seeks that permanent injunction, disgorgement, civil penalties and remove Musk from serving as an Officer or Director of a public company, the SEC said it in its statement.
Musk said he had done nothing wrong. “This unjustified action by the SEC leaves me deeply saddened and disappointed,” he said in a statement, according to Reuters. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
According to CNBC, Analysts believe the SEC complaint will cause a disruption in the Company and damage its financing as well as demand for its electric vehicles.
Barclays analyst Brian Johnson says the decision will weigh on Tesla’s shares. He reiterated his underweight rating and a price target of USD 210.00.
Morgan Stanley analyst Adam Jonas told clients that he sees the announcement damaging employee morale as well as a decline in demand for vehicles. Jonas reiterated an equal weight rating and price target of USD 291.00.
J.P. Morgan analyst Ryan Brinkman says the issue will affect the Company’s ability to raise financing. Brinkman reaffirmed his underweight rating and his previous price target of USD 195.00.
Citigroup analysts downgraded Tesla to a sell rating from neutral, saying that if Musk stays or leaves the Company, it will negatively affect the Company.