Elon Musk's fortune takes a $1.5bn hit after SEC lawsuit

Media playback is unsupported on your device                  Media caption Who is Elon Musk

After consulting investors, banks and potential financiers, Mr. Musk nixed the idea.

The SEC, in a 23-page complaint filed in federal court, alleged "Musk knew or was reckless in not knowing" that he was making false and misleading statements when he said he had secured funding for a possible privatization of the company.

The complaint alleges that Musk's tweet harmed investors who bought Tesla stock after the tweet but before accurate information about the funding was made public. The SEC press release also calls for "a bar prohibiting Musk from serving as an officer or director of a public company".

Nasdaq, which requires advance notice of market-moving announcements, had not received one, Peikin said, and halted trading for 90 minutes after Tesla's shares jumped. The lawsuit also accuses Musk of picking a $420 stock price because "he had recently learned about the number's significance in marijuana culture and thought his girlfriend 'would find it amusing, which admittedly is not a great reason to pick a price'".

'The SEC civil action may lead to Musk's exit from Tesla (either permanently or temporarily) and the Musk premium in the shares dissipating, ' Barclays analyst Brian Johnson said.

'According to the private equity fund partner, the transaction structure that Musk was contemplating was "unprecedented" in his experience'. But even after that drop, investors seem to feel Tesla is about as valuable as General Motors, and significantly more valuable than rivals like Ford and Fiat Chrysler.

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The lawsuit sent Tesla shares sinking after hours, and the pain continued today, with investors wondering what the company would be like without Musk. It is highly leveraged and bleeding cash that will be needed to repay $1.2 billion in convertible bonds coming due in the next six months.

Shares plummeted 13% as investors and Wall Street analysts dove into what the suit might mean for the electric-car maker.

In April 2017, Tesla dethroned GM to become largest U.S. automaker by market cap.

Musk rejected a settlement with the SEC that would have allowed him to pay a fine and remain Tesla's CEO if he agreed to certain stipulations. The SEC declined to comment on the settlement reports.

Many have sent out an ill-advised tweet at least once in their lives, but Musk's joke about taking Tesla private at $420 a share could get him removed from the company. Contributions of 200 words or more will be considered for publication.

"Uncertainty around the future leadership at Tesla may impact its ability to raise additional capital", Spak wrote.

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