Things are looking downright messy right now for Elon Musk and Tesla following a lawsuit by the Securities and Exchange Commission on Thursday accusing the CEO of securities fraud for his infamous "funding secured" tweet about taking the automaker private.
Musk denied, stating that it was just a beautification technique to make Tesla's 20 percent share increase look a bit more appealing.
On Thursday, the SEC sued the serial entrepreneur and engineer for "false and misleading" statements associated with a series of tweets in which Musk suggested that Tesla was weighing a take private acquisition when the share price hit $420.
Musk said he was "deeply saddened and disappointed" by this "unjustified action".
The SEC complaint also alleges that "Musk did not discuss a $420 price per share with any potential funding source for a Tesla going-private transaction" prior to emailing the board about his proposal on August 2.
The future of Tesla looks increasingly uncertain, with U.S. regulators having filed a lawsuit this week against the automaker's high-profile CEO, Elon Musk. Today's ~14 percent drop was the worst day in Tesla's history since way back in 2013.
What just happened? Tesla's chief could have skirted the SEC's recently filed lawsuit but reportedly felt that signing a settlement could have blemished his reputation.
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"In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source", the SEC said in its lawsuit.
Grundfest also said that the challenge for the SEC is to "appropriately discipline Musk while not harming Telsa's shareholders".
After the SEC filed its complaint, Tesla and its board of directors issued a statement voicing confidence in Musk's "integrity and leadership".
Fund representatives expressed interest in taking Tesla private and asked about building a factory in the Middle East, Musk told the SEC. Short sellers lost $1.3 billion in trading the day after Musk posted the tweet. CFRA's Garrett Nelson cut his rating on the shares to Sell from Hold and lowered his price target to $225 from $265.
Shares were last down 11.2 pct at $273, wiping about $6 billion off Tesla's market value.
Spiegel also echoed the concerns of corporate governance experts who have lambasted Tesla's board for being too beholden to a CEO that they are supposed to oversee.
In a statement, Tesla's board of directors said it remained "fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful USA auto company in over a century".