On Friday morning, Tesla's share price was down another 12% as investors anxious the vehicle company's leading light was finally out. But Musk's future at the helm of the electric auto company was thrown into question when the SEC sued him on Thursday.
It's not clear that Musk will be removed, as he is denying the allegations, but the possibility jolted investors because Musk is seen as nearly synonymous with Tesla. "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. "They are all a little bit off central casting in their own way, but that sort of is what lets them walk through these walls or over these walls when most people are terrified".
Breitbart News reported yesterday that Tesla CEO Elon Musk is being sued by the SEC for making false and misleading statements in August when he tweeted that he had "funding secured" to take his electric-car manufacturer private at $420 a share.
The SEC could impose hefty fines and ban Musk from serving as an executive or director of a publicly traded company for life. The case is not expected to go to trial until early next year. Musk, the company's largest shareholder, lost $1.6 billion in a single day.
Musk said on Thursday he had done nothing wrong.
After the initial tweet, Tesla's chief financial officer asked Musk "would it help" if executives drafted a blog post or employee email to explain his tweet.
The lawsuit doesn't bode well for Musk and may have put his job at risk.
Barclays has warned that if Musk is forced to leave, it will send Tesla shares down another $130 - or 48 per cent from their current level. Musk had without evidence called Unsworth a "pedo guy" and "child rapist" after he had mocked Musk's plan to save the teammates with a miniature submarine. A Tesla bond issue due in 2025 yields more than 8%, against 6% for the average junk bond, reflecting investor concerns about the company.
But Krebs said most "investors and consumers probably want him to stay". And it could make parts suppliers skittish about doing business with the company.
Tesla Shares have fallen from almost $380 early last month to around $260 last night.
In the meantime, Tesla (NASDAQ:TSLA) stock is down big, very big. "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 the complaint filed in federal district court in the Southern District of NY.
Without disputing the reference to cannabis, Musk was quick to criticize the SEC's decision to bring an enforcement action. Since that tweet, Musk has been seen on camera apparently smoking marijuana in California, where the drug is legal.
"There's little question that Mr. Musk's departure would likely cause harm to Tesla's brand, stakeholder confidence and fundraising", Citigroup said.