Another hairpin turn for Tesla as stock dives on SEC charge

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

Shares of Tesla Inc dived 12 per cent in early trading on Friday after USA regulators accused chief executive Elon Musk of fraud and sought to remove him from his role in charge of the electric auto company.

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.

The $420 share price Musk set for the take-private deal, SEC investigators said, was itself a weed reference created to impress his then-girlfriend, the synth-pop musician Grimes.

Share value in Tesla is down more than 11.6 percent on the day, trading at $271.75 as of this writing.

Musk and Tesla's many fans had been hoping that a strong quarterly report on Model 3 electric-car deliveries, and the resulting profit, would trump the controversy over Musk's go-private play in August.

The SEC couldn't resist at minimum making an example of Musk. More seriously for Musk, and Tesla, they can ban a director from serving as an officer in a public company - a measure they are pursuing against Musk.

"Musk's statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock's then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote". However, the settlement would have barred Musk as chairman for two years and would require Tesla to appoint two new independent directors, reported CNBC's David Faber, citing sources.

Musk said the SEC's allegations are "unjustified" and that he "never compromised" his integrity.

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Mr. Musk insists he has "always taken action in the best interests of truth, transparency and investors" and that the facts will bear him out.

After the SEC filed its complaint, Tesla and its board of directors issued a statement voicing confidence in Musk's "integrity and leadership".

But Tesla devotees believe he is a visionary and vital to the company's future.

Four early research notes from Wall Street analysts and brokerages all said that Musk might have to resign. "And Elon often operates as if he's above the law", said Gene Munster, a managing partner of the venture-capital firm Loup Ventures.

As it happens, there is also a criminal investigation of Tesla by the Department of Justice.

If the company stays public, however, Musk could be forced to take a back seat role or exit the company entirely. Tesla's board backed Musk, saying that it is "fully confident" in him.

The company has projected profitability under generally accepted accounting principles in the second half of 2018, but some analysts think it will have to raise cash in coming months.

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