A recent lawsuit states Musk was lying when he said Tesla had secured funding to go private in August.
The Securities and Exchange Commission (SEC) sued Tesla CEO Elon Musk Thursday, alleging he made false and misleading statements, according to a CNNMoney report. Back on August 7, as Tesla sought to privatize, Musk sent a tweet that Tesla secured funding to do it. “Am considering taking Tesla private at $420. Funding secured,” was what Musk wrote at the time.
In this lawsuit, the SEC lodges a complaint that he did not actually have funding secured. It also states, “In addition, he had never even discussed taking Tesla private at a price of $420 per share with the Fund or any other potential investor…He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required.”
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The SEC went further to say that tweet and others throughout the day caused confusion and harm to investors. Another issue is that the tweets could constitute manipulating the market. Per CNNMoney’s report, Cornell Law professor Charles Whitehead stated, “This is serious. This is what you go after insider traders and market manipulators on.”
Musk later announced that, in coordination with Tesla’s Board of Directors, the company would not go private after all. The company was in talks with a Saudi private investment fund to back at least part of the move to take Tesla private. In light of Musk’s statements and Tesla’s recent events, the Justice Department is also looking into the matter. Tesla said it received a voluntary request for documents, and is cooperating with the request.
To clarify, the SEC isn’t going after Tesla at this point. Rather, the commission is pursuing Musk for his allegedly false statements regarding the company’s funding to go private. A USA Today report states Musk lost $1.166 billion in after-hours trading, after the lawsuit broke. Tesla’s stock value fell to $272 per share, falling from its $307 closing point Thursday.