On Thursday, shares of electric vehicle maker Tesla Inc. (NASDAQ:TSLA) dipped more than 10% after hours as the U.S. Securities and Exchange Commission officially filed a lawsuit against Tesla's CEO Elon Musk, looking to ban him from leading a publicly traded company after a series of Tweets in which the CEO indicated the company would be going private at a valuation far in excess of the share price of the EV manufacturer at the time.
According to the SEC, "Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day...He did not discuss the content with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules require."
These damning accusations have not yet been responded to by Mr. Musk or his board (at the time of writing), however I would expect Tesla shares to trade hands furiously over the upcoming trading week as the market attempts to disseminate just how serious these allegations really are. For a company like Tesla which is uniquely tethered to its CEO and its retail investor following, these allegations are likely to cause much more harm than the initial 10% after hours hit the company's stock price has taken. In a few words: investor beware.
