SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

SEC Lawsuit Against Musk Wiped $7.3 Billion From Tesla’s Market Value

The charges come after Musk claimed in August via a series of tweets that he was planning to take the electric auto maker private, and implied that such a move was imminent with "funding secured". Musk did not found Tesla but provided early financing. Tesla will also pay a $20 million fine.

The SEC had charged Musk with securities fraud, alleging that he misled investors when he tweeted on August 7 that he had "funding secured" to privatise the electric automaker at $420 (roughly Rs. 30,500) a share.

In the agreement, Musk will resign as Chairman but will remain CEO and also a member of the board. Tesla shares plummeted 14% on Friday, the biggest drop in nearly five years.

Munster said the settlement was the best outcome for all involved.

"The resolution is meant to prevent further market disruption and harm to Tesla's shareholders", Steven Peikin, co-director of the SEC's Enforcement Division, said in the statement. Andrew Doane, who has a Model S sedan, Model X crossover and Model 3 vehicle and is president of the Tesla Owners Club of the Mid-Atlantic region, mustered club members to pull shifts at delivery hubs in Virginia and Maryland, and worked one himself.

While the 15-year-old company has never earned an annual profit, Tesla's CEO has vowed it's the verge of making money and stemming cash burn that's exceeded more than $1 billion in recent quarters.

Musk said he later decided against the plan.

"Both sides have pulled back, taken a deep breath and realized that in the interest of the company, its shareholders, they need to put this behind them", said Stephen Crimmins, a former SEC enforcement lawyer who's now a partner at Murphy & McGonigle.

From the beginning of this case, the SEC requested as a penalty that Elon Musk had left the position of chairman from the board of Tesla, something that has now been achieved.

But its shares have been hit hard since the SEC filed the lawsuit. Tesla also agreed to pay $20 million and implement procedures and controls to oversee the CEO's communications of material information after he tweeted - falsely, according to the SEC - that he secured funding last month to take the company private. Despite Friday's plunge, though, Musk seemed to be in light spirits on Friday, expressing his gratitude to the Tesla community and even posting a "Don't Panic" message on Twitter.

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