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Tesla Chief Elon Musk Accused For Fraud By US SEC

Tesla Chief Elon Musk Accused For Fraud By US SEC
Alleging that Tesla CEO Elon Musk had made a series of "false and misleading" tweets about the possibility of taking Tesla private last month, the U.S. securities regulator – the Securities and Exchange Commission, now want Musk to be removed from the electric car making company.
Tesla, with a market valuation of over $50 billion, would be hard hit if it has to lose its public face and guiding force, mainly because of the extent of belief that investors have in him.
Following the news, shares of Tesla fell by 12 percent.
"Elon is Tesla and Tesla is Elon and that's great when Elon is scoring touchdowns and grand slams but not so great when there are negative things tied to him," said Karl Brauer, executive publisher at Kelley Blue Book. "I don't know how you spin an SEC lawsuit that seeks to remove you from leadership of your own company."
Musk said that nothing wrong had been done by him. "This unjustified action by the SEC leaves me deeply saddened and disappointed," he said in a statement. "I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."
The SEC case was filed in Manhattan federal court on the basis of Musk’s tweet on August 7 where he had said that he was contemplating taking Tesla private and that he had even secured financing for the same.
In the case filed by the SEC, it has been alleged that Musk’s calculation of $420 price per share in the tweet was at a 20 percent premium over that day's closing share price and that the number is often associated with marijuana. The CES further quoted Musk as saying that he thought that the tweet would appear to be funny to his girlfriend.
It is not common for CSRC to suggest removal of a top executive from a firm – especially for a well known figure such as Musk.
"The lesson for CEOs is that the rules apply to everyone including highly successful visionaries," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "This is an outlier. Very few CEOs have ever or would ever engage in this kind of action... That's why the SEC reacted, to make sure it never becomes a trend."
Tweeter gas been widely used by Musk on earlier occasions to criticise short-sellers who bet against Tesla shares and has been subjected to a number of lawsuits from investors already over the Aug. 7 tweets.
Musk "knew or was reckless in not knowing" the information that he disseminated through his tweets about taking Tesla private at $420 a share were misleading and false because no discussions with any funding source had been discussed by Muck on the issue, the SEC said.
The SEC further stated that it had been just one meeting for less than an hour that Musk had with three representatives of Public Investment Fund on July31 where the representative of the Saudi Arabian sovereign wealth fund gad shown some interest in taking Tesla private under "reasonable" conditions.
The SEC has also sought to impose a civil fine and other remedies through the lawsuit. The SEC does not have criminal enforcement power.

Christopher J. Mitchell

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