US securities regulator charges Tesla CEO Elon Musk with fraud

Global Business

US securities regulator charges Tesla CEO Elon Musk with fraud

Charismatic and enigmatic — two traits of Tesla CEO Elon Musk that helped land him in hot water.

CGTN’s Mark Niu reports.

In a press release, the SEC says corporate officers hold important responsibility to shareholders. An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.

On August 7th, Musk tweeted to his nearly 23 million followers: “Am considering taking Tesla private at $420. Funding secured. After the tweet, Tesla shares prices spiked by more than six percent.”

The U.S. Security and Exchange Commission alleges Musk had not discussed specific deal terms with any potential financing partners.

“It is unclear to me whether he can survive in this role,” said Tim Bajarin, President of Creative Strategies. “I think the SEC could at the very least force him out of the CEO role and put restrictions on what he can and cannot say.”

Musk has since issued a statement saying:

“This unjustified action by the S.E.C. leaves me deeply saddened and disappointed.”

“Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

But Musk’s judgment is now questioned, especially after he smoked marijuana- now legal in California – on a radio show.

His target price $420 is a slang reference to smoking cannabis.

A British diver who helped in the operation to rescue the young Thai soccer players is also suing Musk for calling him a pedophile on Twitter.

“I still think he’s a genius. I still think he’s a visionary,” said Bajarin. “I don’t think we’ve seen a character as vocally extreme as Musk. Steve Jobs was also very vocal. But he was measured in what he said publically. And to be fair, we didn’t have Twitter in Steve Job’s lifetime, thankfully.”

But whether Musk manages to remain at Tesla or not, investors are nervous about how the lawsuit will impact the company’s bottom line.

“The vehicle itself stands by itself and the demand for it is not decreasing,” said Bajarin. “The business practices around it may take a hit, which of course eventually impacts the ability to deliver the amount of cars.”

The SEC’s complaint seeks to bar Musk from serving as an officer or director of a public company.

Musk is CEO of SpaceX — his other high-profile private company. Musk has considered taking Space X public. So any fallout from this legal action may not be confined to Tesla.