According to reports in the media quoting sources, a settlement with the SEC can be made by Tesla Inc’s Elon Musk in relation to the case filed by the US regulator charging Musk of committing fraud in reference to his tweets of taking Tesla private last this August. The news of the case saw Tesla shares fall by 14 per cent. The SEC has also sought the removal of Musk form Tesla.
According to analysts, Musk is directly involved in virtually every business activity of the electric car maker Tesla – starting from product development and technology strategy to marketing and sale. He is also considered to the guiding force for providing future direction to the company as well as his capacity to raise capital.
On Thursday, the cost of insuring Tesla debt against default touched the highest point while short sellers – betting against Tesla shares, got attracted on Friday by the fall of the share price. According to S3 Partners, which said Tesla recently regained the title of most-shorted U.S. stock, short sellers notched $1.27 billion Thursday alone in paper profits.
The billionaire entrepreneur said he had done nothing wrong and the company’s board said it supported him.
A report published in The Wall Street Journal on Friday claimed that Musk believed that he had secured verbal confirmation from Saudi Arabia’s sovereign wealth fund about financing to take Tesla private.
He left a July 31 meeting with the fund’s managing director “with no question that a deal with the Saudi sovereign fund could be closed”, Musk last month said in a blog.
The meeting between Musk and the fund “lacked discussion of even the most fundamental terms of a proposed going private transaction”, said the SEC in its legal suit.
According to reports on Friday, a potential settlement with the SEC was refused by Musk at the last minute. Under that settlement, Musk would have had to forsake leadership position in Tesla for two years and would have had to cough a nominal fine.
However there were still reports on Saturday that while Musk was willing to fight out the case in court, he was still also open to an out of court settlement with the SEC. None of the reports however specify any terms of such a settlement.
Concerns about the ability of the Tesla board to oversee Musk were expressed by Aeisha Mastagni, a portfolio manager for the California State Teachers’ Retirement System, a Tesla investor. She said that a change in the Tesla board was welcome.
“I think this board is insular, ripe with conflicts; it’s the poster child for bad corporate governance,” she said.
(Adapted from Reuters.com)