The SEC's decision to sue Elon Musk and seek his ouster as chairman of Tesla came after Musk pulled out of settlement talks at the last minute, reports CNBC. Under the deal, Musk would have paid a fine but admitted no wrongdoing in regard to his infamous tweet in August about having secured funding to take Tesla private. However, Musk would have been barred from acting as chairman for two years, and CNBC's David Faber reports that Musk couldn't live with that "blemish" on his record. Instead, he will fight what he sees as an "unjustified" action. Related developments:
- Investors rattled: Tesla shares were down 13% Friday morning, reports Business Insider. It notes that Musk's August tweet suggested going private at $420 a share, but it's possible the stock could close around $250 on Friday.
- Real danger: A Wall Street Journal story suggests the news poses a threat to the very survival of the company. For one thing, Tesla has no succession plan in place. If investors lose confidence amid the chaos, the company might not be able to raise money it needs to operate. And if customers lose confidence, Tesla could face a rash of devastating cancellations. More so than a lot of companies, "Tesla requires positive news flow around the future of the company," as one financial analyst puts it.
- Criminal case? The SEC complaint is a "road map to criminal charges," says New York Times reporter Jim Stewart in a CNBC interview. The complaint, he says, "talks about the [short sellers] and the implied motive that he wanted to punish the shorts, which would be a manipulation." Also, the feds could ban Musk from acting as CEO not just of Tesla but of any public company, notes the Times, calling it "one of the most serious remedies the SEC can impose against a corporate executive."