{"id":2659,"date":"2018-09-28T17:53:26","date_gmt":"2018-09-28T17:53:26","guid":{"rendered":"http:\/\/www.styledeals.co.uk\/blog\/tesla-shares-fall-after-regulators-launch-musk-lawsuit\/"},"modified":"2018-09-28T17:53:26","modified_gmt":"2018-09-28T17:53:26","slug":"tesla-shares-fall-after-regulators-launch-musk-lawsuit","status":"publish","type":"post","link":"https:\/\/www.styledeals.co.uk\/blog\/tesla-shares-fall-after-regulators-launch-musk-lawsuit\/","title":{"rendered":"Tesla: Shares fall after regulators launch Musk lawsuit"},"content":{"rendered":"\n
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Media caption<\/span>Who is Elon Musk?<\/figcaption><\/figure>\n

Tesla shares have sunk after US regulators took legal action against co-founder Elon Musk for alleged securities fraud.<\/p>\n

On Thursday the Securities and Exchange Commission filed a lawsuit over claims made last month by Mr Musk that he had funding to take the company private.<\/p>\n

The billionaire boss of the electric carmaker called the action unjustified.<\/p>\n

But the filing was a potentially serious blow for the company, which was already under financial strain.<\/p>\n

Mr Musk has led the electric carmaker as chief executive since 2008, presiding over its rise into a company with a market value that rivals Ford and General Motors.<\/p>\n

His celebrity status and reputation for entrepreneurial vision attracted investors and legions of fans – even though the firm has consistently lost money and struggled to hit manufacturing targets.<\/p>\n

Now the SEC is seeking to bar Mr Musk from acting as an officer or director of a publicly traded company.<\/p>\n

The move would strip him of his role at Tesla and could make it difficult for the firm to raise money at a critical moment for the company, which has been spending heavily to increase production of its latest car.<\/p>\n

On Friday, the shares opened 10% lower as Wall Street investors reacted to the news. <\/p>\n

“The mere possibility that Musk could be removed as chief executive (or entirely from Telsa) is likely to cast an overhang on the stock,” analysts for AllianceBernstein wrote. <\/p>\n

What are the charges?<\/h2>\n

Mr Musk stunned the business world in August when he announced on Twitter that he was considering taking Tesla off the stock market and into private ownership.<\/p>\n

He wrote he had “funding secured” for the proposal, which would value Tesla at $420 per share.<\/p>\n

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Media caption<\/span>Tesla’s Elon Musk ‘mislead investors’ SEC alleges<\/figcaption><\/figure>\n

In a complaint filed in New York, the SEC said those claims were “false and misleading”.<\/p>\n

“In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the regulator said.<\/p>\n

Mr Musk has opted to fight the claims, reportedly rejecting opportunities for settlement.<\/p>\n

On Thursday, the Tesla chief said that he acted in the “best interests of truth, transparency and investors”.<\/p>\n

“Integrity is the most important value in my life and the facts will show I never compromised this in any way,” he said in a statement.<\/p>\n

Tesla’s board of directors said in a statement that they were “fully confident in Elon, his integrity and his leadership of the company”.<\/p>\n

What are his chances?<\/h2>\n

The SEC has a strong case when it comes to proving that Mr Musk’s tweets – which triggered a temporary spike in the firm’s share price – were reckless, said Adam C Pritchard, a professor of securities law at the University of Michigan Law School.<\/p>\n

But he says it may be more difficult to convince a court that the claims merit a lifetime bar from acting as director or officer of a public company, given how critical Mr Musk has been to Tesla’s success and ability to raise money.<\/p>\n

“If I’m the judge, I’m thinking – do I want to blow up this company just because he’s a jackass?” Mr Pritchard added.<\/p>\n

He says he expects the two sides to eventually negotiate a settlement.<\/p>\n

Will Elon Musk leave the company?<\/h2>\n

Rebecca Lindland, executive analyst for Kelley Blue Book, said Mr Musk is behind much of Tesla’s appeal for car buyers and investors.<\/p>\n

But, she added, his behaviour in recent months has not done the firm “any favours”.<\/p>\n

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Image copyright<\/span>
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\n Mr Musk is credited with pushing the car industry toward electric vehicles
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This spring, Mr Musk alarmed investors with jokes about Tesla’s bankruptcy and abrupt dismissal of questions from financial analysts during earnings calls.<\/p>\n