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Tesla CEO, Elon Musk Charged With Fraud

Elon Musk, the chief executive and co-founder of Tesla, has been charged with securities fraud and could lose control of his company as a result.

The allegations come as the American Securities and Exchange Commission (SEC) alleges tweets by Musk “caused Tesla’s stock price to jump by over six per cent on August 7, and led to significant market disruption.”

Back in August, Musk tweeted to his 22 million followers: “Am considering taking Tesla private at $420. Funding secured.” This, the SEC says, represented “a substantial premium to [Tesla’s] trading price at the time”. The SEC also alleges “Musk had not discussed specific deal terms with any potential financing partners, and he allegedly knew that the potential transaction was uncertain”.

The SEC says that “According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a ‘standard premium’”.

Rumours at the time suggested the $420 price had been chosen by Musk because of its reference to US slang, which links the number 420 to marijuana. The SEC adds credence to this suggestion, alleging: “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 funny, which admittedly is not a great reason to pick a price.’”

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Announcing the charges, Steven Peikin, co-director of the SEC’s enforcement division, said: “Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders”. He added: “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”

Musk subsequently backtracked on his tweet, in a statement that said “Tesla’s existing shareholders believe we are better off as a public company”, adding: “I believe the better path is for Tesla to remain public.”

Despite these retractions, the SEC is seeking to have Musk removed from his position at Tesla, and also aims to apply “civil penalties”, which could see him slapped with a significant fine.

A statement issued by Tesla and its board of directors said they were “fully confident in Elon, his integrity, and his leadership of the company”, which had resulted in Tesla becoming “the most successful US auto company in over a century”.

Musk himself said he was “deeply saddened and disappointed” by the SEC’s decision, adding: “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.”

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Written by How Africa

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