SEC Charges Musk with Fraud, Seeks to Bar Musk from Being CEO of Public Company

Tesla founder Elon Musk has been charged by the SEC with securities fraud. The SEC seeks to bar him from being CEO.

The New York Times reports S.E.C. Sues Tesla’s Elon Musk, Seeking to Bar Him From Running a Public Company.

> The Securities and Exchange Commission filed a lawsuit Thursday against Elon Musk, the chief executive of Tesla, accusing him of making false public statements with the potential to hurt investors.

> The lawsuit, filed in federal court in New York, seeks to bar Mr. Musk from serving as an executive or director of publicly traded companies. Tesla, the electric-car maker of which Mr. Musk was a co-founder, is publicly traded.

> The suit relates to an Aug. 7 Twitter post by Mr. Musk, in which he said he had “funding secured” to convert Tesla into a private company.

> The S.E.C. said Mr. Musk “knew or was reckless in not knowing” that his statements were false or misleading. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the S.E.C. said in its lawsuit.

> Federal prosecutors in California also have sought information from Tesla, an inquiry that appears to be at an early stage.

Amusing Details

From Zero Hedge

What is the SEC seeking? Simple: to bar Musk as an "officer and director":

> The Commission brings this action against Musk pursuant to Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)] to enjoin the transactions, acts, practices, and courses of business alleged in this Complaint and to seek orders of disgorgement, along with prejudgment interest, civil penalties,and an officer and director bar against Musk**.

Here are some of the other highlights:

> This case involves a series of false and misleading statements made by Elon Musk, the Chief Executive Officer of Tesla, Inc. (“Tesla”), on August 7, 2018, regarding taking Tesla, a publicly traded company, private.Musk’s statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote.In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source.

Disclosure. I am short Tesla via PUTs.

Flashback August 14

Cramer: 'We'll be on Mars' by the time the SEC penalizes Tesla for Elon Musk tweet

Mike "Mish" Shedlock

Comments (19)
No. 1-12
Six000mileyear
Six000mileyear

Liquidating positions in a ~$72B company will definitely ripple through markets globally as margin calls are made in this highly leveraged environment.

caradoc-again
caradoc-again

It could mean some appropriate CEO is found but to clear house properly a tonne of money will likely need to be raised.

That which doesn't kill TSLA will make it stronger but kill looks more likely imho.

Schaap60
Schaap60

That was pretty quick for the SEC. Does Tesla fight or throw Musk overboard? Obviously they should dump him, but one never knows.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

I bought them way out of the money. strike 230

NormGriffin
NormGriffin

Where is GliderDude?

wootendw
wootendw

I've been expecting Musk to resign or get dumped before this.

KidHorn
KidHorn

Getting rid of Musk is, and has always been, Tesla's only hope for long term survival.

abend237-04
abend237-04

The SEC is finally doing the board's job for them. A 'visionary' without a bridle, totally unrestrained in the C suite is a disaster waiting to happen. It just happened.

gliderdude
gliderdude

Just love the SEC protecting Americans! Go here to see total of $2.6 billion fines on 150 companies for overt fraud of public for multi-trillions $ in 2008 financial crisis https://bit.ly/2ItG7xn . True champions, not at all affected by WS political influence, no sir-ree. Now Repugs here are celebrating "government regulation" because it may profit their short irregardless of free market forces. To top it off the SEC, over an ill-advised tweet, is seeking to remove the chosen CEO of TSLA shareholders, in an unprecedented time frame. At any rate TSLA as Kramer says is "a battlefield" and investors need to be aware that nefarious shortie goings on, are part of the game. I suggest some vested interest pulled strings and got to the SEC. Excuse me for my skepticism on the righteousness of SEC regulators here as I just finished watching season 2 of Ozarks. Highly recommended for the examination of the ultimate sleaze capacity of politicians. Otherwise kudos to a******* here for winning this round

John212
John212

Tesla is musk.

CautiousObserver
CautiousObserver

The way this SEC action unfolded over the weekend confirms that they will do what they can to keep stock prices going up. Musk's "taking Tesla private at $420. Funding secured" tweet was a knowingly false material statement by a CEO. Whether or not he had malicious intent to distort share prices, the SEC could not completely ignore what he did without damaging themselves. When Musk refused to make a deal and he double-dog-dared the SEC to do something about it, then they sued. Also, it looks like the SEC gave him a Mulligan after he accepted that the consequences of not making a deal would be severe.

I am surprised investors still have faith in Musk. Hope springs eternal, I guess. The stock will probably shoot up on Monday. Many people are probably making and losing truckloads of money with all this volatility.

gliderdude
gliderdude

New settlement over weekend looks very reasonable and protective of Tesla shareholders, and as such looks like original demands were more of a negotiating ploy. My only reservation is about how the new Chairman of Board will be selected. It will be interesting to see if SEC decision has more effect than Musk's tweets come Monday morning. As a long I currently like it. Musk needs more focus and this seems to be good for the company. I in fact tried in desperation to tweet Musk to stop responding to shorts, focus on his job, and hire others to deal with short FUD, and run his tweets through a lawyer. Interesting that Mish has not yet commented and is still trying to figure out how to spin this development.