Tesla shares fell in the US Thursday as the Securities and Exchange Commission charged its CEO, Elon Musk, with securities fraud. The charge follows his tweets regarding taking the electric car maker private. The SEC says the claims of having funding secured was misleading and caused market disruption.
Tesla shares ended the US Thursday trading session 0.67% lower at $307.52. Meanwhile, the stock is currently over 10% in the red in out-of-hours activity.
Tesla CEO charged
After launching an investigation earlier in the month into Tesla and Musk’s activities regarding his Twitter announcements, the SEC Thursday said it had charged the CEO with securities fraud.
The charge relates specifically to Musk’s now infamous tweet, that he would take Tesla private at $420 per share and that funding had been secured. The Tesla CEO also said that the only uncertainty regarding taking the firm private was the wider shareholder view.
“The SEC’s complaint alleges that, in truth, Musk had not discussed specific deal terms with any potential financing partners, and he allegedly knew that the potential transaction was uncertain and subject to numerous contingencies,” the SEC said.
Position of trust
Among the SEC’s responsibilities, is to ensure that businesses and corporate leaders follow their regulations with regards to a whole host of details, including communications.
“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.”
“Taking care to provide truthful and accurate information is among a CEO’s most critical obligations,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “That standard applies with equal force when the communications are made via social media or another non-traditional form.”
The SEC alleges that Tesla’s CEO “violated antifraud provisions of the federal securities laws.” The body added that it is seeking “a bar prohibiting Musk from serving as an officer or director of a public company.”