Elon Musk and Tesla have been sued by the Securities and Exchange Commission (SEC) for fraud over the company’s aborted plans to take the electric car company private.
The move could potentially lead to Musk being banned from leading a public company, or fines for him and the company. Shares of the automaker fell more than 4% in after hours trading Thursday once the news had broken.
The SEC and the justice department have been investigating Tesla after Musk suggested in August he was preparing to take Tesla private and claimed he had “funding secured”.
The SEC said: “This statement was false and misleading. Over the next three hours, Musk made a series of additional materially false and misleading statements via Twitter.”
Tesla’s shares shot up 11% on the news, but it transpired that Musk had only had preliminary talks about taking the troubled company private and that funding had not been secured.
That news also triggered lawsuits from investors, some of whom have been betting heavily on a collapse of Tesla’s share price. As the SEC noted, “Musk has complained that Tesla has been unfairly targeted by short sellers [investors betting on a share price collapse] and predicted that short sellers would be ‘burned.’”
Explaining the tweet, Musk said he understood Saudi Arabia’s sovereign wealth was prepared to provide funding to take the company private at a proposed price of close to $420 per share.
“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,” the SEC alleged in its suit.
“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.’”
For more read the full of article at The Guardian
