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Three takeaways for investors after the Tesla suit

Three takeaways for investors after the Tesla suit

27, of fraud and sought to remove him from his role in charge of the electric vehicle company, saying he made a series of "false and misleading" tweets about potentially taking Tesla private last month.

Tesla Inc's (TSLA.O) Elon Musk could settle with US regulators who have sued to remove him from the electric carmaker's leadership, but he is prepared to fight the securities fraud lawsuit against him in court, sources said on Friday as shares plunged about 14 percent. It alleges investors were misled by Musk's claims that he'd worked out funding to take Tesla private at a premium of $420 a share, a number that Musk later conceded was meant to be a humorous marijuana reference, according to the SEC suit.

Gorman added that even if the SEC lawsuit moves forward without any interruption from Justice, it is hard to see the regulator separating Musk from his company without doing damage to the electric-car maker.

The SEC further states that "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".

The no-compromise stance suggests that the legal case over Musk's considered-but-discarded plan to take Tesla private won't be resolved quickly.

The SEC took issue with a number of Musk's tweets on August 7, primarily dealing with the certainty with which he asserted Tesla could be taken private.

The billionaire entrepreneur said he had done nothing wrong and the company's board said it supported him.

Musk said in a statement that the SEC's "unjustified action" left him "deeply saddened and disappointed". He said: "I have always taken action in the best interests of truth, transparency and investors".

Tesla shares have been volatile for years, but even by its standards, August and September have been dramatic. If Tesla fails to meet production targets in the second half of 2018, it will need a different source of cash to pay for the $1.3 billion in debt it has coming due by March 2019. The two sides reportedly came close to a settlement before Musk backed out and the SEC filed a complaint seeking to ban him from serving as a director or officer. The Justice Department has also opened a fraud investigation.

It's surely the most expensive tweet ever, as Tesla has lost $19.6 billion in value in that drop, a total that is just short of the value of Twitter as a company.

The things people do to make their girlfriend laugh. The commission chose to go ahead with it after Mr. Musk refused to negotiate a settlement, according to a person familiar with his thinking.

Tesla's shareholders have to assess what will happen to the company if Mr. Musk is not the CEO.

Johnson says the suit only confirms what he's been saying for a while now, and that it will force investors to actually focus on the company's fundamentals.

Hanging in the balance is Tesla, the $45 billion emblem of America's future in battery-powered cars.


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