Published: Sat, September 29, 2018
Markets | By Erika Turner

Elon Musk Is Having a Very Bad Week. So Are Tesla Investors


On Aug. 13 - almost a week after the initial tweets - a post on Tesla's blog attributed to Musk appeared to walk back his earlier statements, saying Musk had had the impression there was "no question" that a deal could be closed to take the company private.

Musk denied, stating that it was just a beautification technique to make Tesla's 20 percent share increase look a bit more appealing.

Tesla TSLA and the Securities and Exchange Commission were very close to a no-guilt settlement Thursday, reported CNBC's Andrew Ross Sorkin on Friday, citing sources.

Musk had a way to avoid going to court, and he didn't take it.

Musk, 47, is the public face of Tesla and JP Morgan analyst Ryan Brinkman questioned how easy it would be for the $50-billion manufacturer, which is still losing money, to raise funds at affordable rates without him.

Musk, days later, backed away from the offer.

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Tesla plunged as much as 14 percent in early trading Friday after the U.S. Securities and Exchange Commission alleged that Musk committed fraud by tweeting last month that he'd secured funding to take the company private.

"When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a 'special objective fund, ' and had not confirmed support of Tesla's investors for a potential going-private transaction".

"I have always taken action in the best interests of truth, transparency and investors", Musk said.

But news of the SEC's lawsuit had a greater immediate reaction from investors than Musk's August 7 tweets, with Tesla's stock tumbling more than 13 percent in after-hours trading. It also is asking for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties. According to Gene Munster, a managing partner of venture capital firm Loup Ventures, there's about a 25 percent chance Musk remains Tesla's CEO. "Integrity is the most important value in my life and the facts will show I never compromised this in any way".

The board too issued a statement in support of Musk, saying it was "fully confident in Elon, his integrity and his leadership of the company". Musk recently appeared to be smoking marijuana in a video clip that has been widely circulated. Musk's nine-word tweet could be the most costly mistake he has ever made.

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