Tesla’s Elon Musk sued by SEC

U.S. securities regulators are asking a federal court to oust Tesla Inc.’s Elon Musk as chairman and CEO.

In a complaint filed Thursday, the Securities and Exchange Commission alleged Musk committed securities fraud with false statements about plans to take the company private. Musk falsely claimed in an Aug. 7 statement on Twitter that funding was secured to go private at $420 per share, a substantial premium over the price at the time.

The complaint filed in U.S. District Court in Manhattan says that Musk had not discussed or confirmed key deal terms including price with any funding source. It also asks for an order enjoining Musk from making false and misleading statements along with repayment of any gains as well as civil penalties. Tesla closed down 0.7 percent at $307.52 a share during official trading Thursday and plunged 14 percent to $265.55 in after-hours trading.

Local experts say Tesla’s Gigafactory in Reno is secure — with or without its current CEO, and even if the company were to go belly up.

“Even if Tesla were to end up going bankrupt — which is something that’s not impossible, and may be very likely — the plant itself will probably carry on,” said Sam Abuelsamid, senior research analyst at Navigant Research.

The Gigafactory

While Tesla manages the land, buildings and utilities for the Gigafactory, the lithium-ion cell manufacturing machinery and equipment is owned by electronics company Panasonic.

“That’s the most valuable part of the facility,” Abuelsamid said. “If Tesla were to go bankrupt, I have little doubt Panasonic would step up to buy the plant to continue operating it. In the coming years, there will be more than enough demand for lithium-ion cells.”

Tesla and the Gigafactory are likely to continue operations, even if Tesla is given “a less flamboyant leader,” said Stephen Miller, director of UNLV’s Center for Business and Economic Research, via email.

“Tesla’s battery operations … are a leader in the alternative energy industry,” Miller said. “One may not want to write them off just yet.”

In 2014, Nevada gave Tesla a $1.3 billion tax incentive package, with Tesla promising to make at least $3.5 billion in capital investments by 2024. The company also estimated it would need 6,500 employees in the Gigafactory by 2024.

So far, the company is on track with its hiring and tax incentive goals. An audit shows the Gigafactory project has invested more than $3.7 billion, with $2.35 billion from Tesla, as of Dec. 31, 2017. The project had hired 3,249 employees in that same time span, with 1,955 working for Tesla.

If Tesla’s promises to Nevada were to fall through, it wouldn’t be a first for the company, said Edward Niedermeyer, a former auto-industry analyst.

“The Silicon Valley funding model has really led this company to make a lot of promises,” he said. “It’s not impossible that they’ve made other promises they’re not able to deliver on.”

The Governor’s Office of Economic Development, which awarded Tesla’s tax abatements, declined to comment on the ongoing case.

Tesla’s future

Musk released a statement Thursday afternoon calling the SEC’s actions “unjustified.”

“I have always taken action in the best interests of truth, transparency and investors,” Musk said in the statement. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

Abuelsamid said if Musk is removed from the company, it could help the company in the long run. While the stock price would initially drop, Abuelsamid believes the company is in need of a CEO who is better at day-to-day operations.

Tesla did not respond to inquiries for comment at the time of publication.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter. The Associated Press contributed to this article.