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

Elon Musk – digging Tesla into a deeper hole

Tesla saw its stock price plunging after the SEC filed a lawsuit against Elon Musk over his now infamous “funding secured" tweet.

As of Friday afternoon, Tesla’s stock price dropped by 14 percent to $264.77, erasing $7.3 billion in shareholder value. Bloomberg reports that Tesla’s plunging stock price is a sign that investors wanted Musk to cut a deal with the Securities and Exchange Commission as soon as possible.

“He needs to settle, and the Tesla board needs to force him to settle," said John Coffee, director of the Center on Corporate Governance at Columbia Law School – and the chain of events proved he was right.

Initially, Musk was ready to accept SEC’s proposed settlement that stipulated he would step down as chairman for two years and pay between $5-10 million as a fine. However, at the last moment he changed his mind, and in turn the SEC filled a lawsuit claiming that “Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source".

Less than two days later, Musk and the SEC reached an agreement, in which he would step down as chairman for three years and pay a $20 million fine. Likewise, Tesla will pay another $20 million due to its failure to check whether Musk’s announcements complied with the law.