The Securities and Exchange Commission (SEC) has sued Elon Musk and Tesla for fraud.
The SEC and the justice department have been investigating Tesla after Musk announced plans to take the group private before admitting no funding had been secured.
“This statement was false and misleading. Over the next three hours, Musk made a series of additional materially false and misleading statements via Twitter,” said the SEC.
Shares in Tesla soared 11 percent after Musk tweeted that he had “funding secured”. Musk only had preliminary talks and no funding had been secured, causing shares to fall again.
“According to Musk, he calculated the $420 price per share based on a 20 percent premium over that day’s closing share price because he thought 20 percent was a ‘standard premium’ in going-private transaction,” said the SEC.
“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 funny, which admittedly is not a great reason to pick a price.’”
“Musk’s false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors. By engaging in the conduct alleged in this complaint, Musk violated, and unless restrained and enjoined will violate again, Section 10(b) of the Securities Exchange Act of 1934 (‘Exchange Act’)… and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.”
Elon Musk said in a statement: “This unjustified action by the SEC leaves me deeply saddened and disappointed. 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.”
Shares in Tesla (NASDAQ: TSLA) fell four percent on the news.