Friday 28 September 2018 4:00 pm

Tesla shares drop despite board backing for Elon Musk after SEC lawsuit


Tesla shares plunged almost 14 per cent today as boss Elon Musk faced the prospect of a ban from ever running a public company again.

The electric car company’s board hailed Musk’s “integrity and his leadership” after the US Securities and Exchange Commission (SEC) filed legal action against him late last night.

Read more: US watchdog sues Tesla chief Elon Musk for securities fraud

Its case alleges that Musk made “false and misleading” statements in his infamous tweet about taking Tesla private back in August.

“Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century,” Tesla and its board said in a joint statement.

“Our focus remains on the continued ramp of Model 3 production and delivering for our customers, shareholders and employees.”

Musk started the furore in August when he tweeted that he had “funding secured” for a plan to take Tesla private for $420 per share, but the SEC claimed he either “knew, or was reckless in not knowing” that these statements misled investors.

Musk later backtracked, saying simply that he had strong assurances from the Saudi Arabian Public Investment Fund that they would back such a share price.

But the SEC alleged that this was based on a 45-minute conversation that didn’t result in a commitment to fund the deal. It further claimed that Musk came up with the $420 figure as a reference to marijuana to entertain his then-girlfriend Grimes.

The tweet has resulted in lawsuits from short-sellers who accuse Musk of pretending to take Tesla private to target them.

If a New York court agrees with the SEC, Musk could be removed from his position as chief executive of Tesla.

Read more: Elon Musk's 'erratic behaviour' causes bank to downgrade Tesla stock

Musk said he was “deeply saddened and disappointed” by the SEC’s accusations.

“I have always taken action in the best interests of truth, transparency and investors,” he said. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

The news comes after Nomura downgraded its recommendation on Tesla, blaming Musk’s “erratic behaviour” – such as his outbursts on Twitter and his appearance on a podcast during which he appeared to smoke weed.