NEW YORK: Tesla Inc’s 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 per cent.
Musk, Tesla’s chairman and chief executive, has been directly involved in almost every detail of its product development and technology strategy, and is credited as the driving force behind the loss-making company’s ability to raise capital.
The cost of insuring Tesla debt against default rose to its highest price ever on Thursday and the plummeting share price attracted new short sellers, who bet against the stock. Short sellers notched $1.27 billion on Thursday alone in paper profits, according to S3 Partners, which said Tesla recently regained the title of most-shorted US stock.
The US Securities and Exchange Commission (SEC) accused Musk on Thursday of tweeting false and misleading information in August about financing for his now-abandoned plan to take the company private, and said it was seeking to remove him as an officer or director.
The billionaire entrepreneur said he had done nothing wrong and the company’s board said it supported him.
The Wall Street Journal on Friday, citing a person familiar with the matter, reported that Musk believed he had a verbal deal for financing from Saudi Arabia’s sovereign wealth fund to take Tesla private.
Musk last month in a blog said 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.”
The SEC in its suit said the meeting between Musk and the fund “lacked discussion of even the most fundamental terms of a proposed going private transaction.”
Musk, 47, walked away at the last minute from a settlement with the SEC that would have required him to give up key leadership roles at the company for two years and pay a nominal fine, according to reports on Friday.
But sources, who requested anonymity because they were not authorised to discuss the matter publicly, said that while Musk was ready to go to trial, he could still settle. They did not discuss possible terms.
CNBC reported that Musk had turned down an SEC deal to give up his role as chairman, while Fox Business Network reported that Musk had been offered a temporary ban as CEO.
Aeisha Mastagni, a portfolio manager for the California State Teachers’ Retirement System, a Tesla investor, said she was concerned about the board’s ability to oversee Musk and the company and that she would welcome changes to Tesla’s board.
“I think this board is insular, ripe with conflicts; it’s the poster child for bad corporate governance,” she said.
The board also lacks a director who could take over for Musk, said investment adviser Cornerstone Capital’s research chief, John Wilson. “The problem for investors is that an investment in Tesla is an investment in Elon Musk,” he said.
— Reuters
Oman Observer is now on the WhatsApp channel. Click here
