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

Former SEC lawyer: Elon Musk 'funding secured' tweet didn't deserve a lawsuit

Former SEC lawyer: Elon Musk 'funding secured' tweet didn't deserve a lawsuit

A few days earlier in an email to Tesla's board of directors and CFO, Musk said the $420 price was based on a 20 per cent premium over that day's closing share price, "because he thought 20 per cent was a "standard premium" in going-private transactions".

The announcement, made to his 22.7 million Twitter followers, caused Tesla's stock price to jump 6.4 percent, according to WSJ.

The SEC allege that Musk upped it to $420 because the number is code in marijuana culture referring to the consumption of the drug, and he thought his girlfriend, Canadian singer Grimes, would find it amusing.

"This calculation resulted in a price of $419 and Musk stated that he rounded the price up to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend would "find it amusing, which admittedly isn't a great reason to pick a price". Tesla will stay public, Musk said on August 24, ending more than two weeks of speculation and calculation about how much a go-private deal would cost and who could be involved in it.

Musk clearly thinks Tesla can not run without him. Their stake in all of this: to prevent Elon Musk from ever holding a CEO or directorial seat of a publicly traded company, EVER AGAIN. Thursday, the SEC filed suit against Musk after the CEO reportedly declined to settle with the agency outside of the courtroom. Tesla almost matched its all-time high after Musk said he had lined up funding to take the company private in a deal worth $420 a share. Musk also felt that by settling he would not be true to himself, according to CNBC.

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Tesla investors have taken a wild ride as Wall Street values the promise of one of the world's leading electric auto makers, the hurdles the company faces and a mercurial CEO who can get the market buzzing with a single tweet. He believes a substantial fine is the most likely outcome.

"This, in our view, was clear manipulation of the stock higher to hurt the shorts", Gordon Johnson, an analyst at Vertical Group, said on TD Ameritrade Network late Thursday.

The board also lacks a director who could take over for Musk, said investment adviser Cornerstone Capital's research chief, John Wilson. That means he's prepared to fight. "Integrity is the most important value in my life and the facts will show I never compromised this in any way". If Mr. Musk wants Tesla to succeed, he should be willing to relinquish some control.

In a previous fraud case over blood-testing firm Theranos, the Justice Department brought criminal charges three months after the SEC announced its settlement with the company's founder Elizabeth Holmes.

"I think it was a big mistake to turn down the settlement offer", CFRA analyst Garrett Nelson said.

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