Elon Musk Sued By The US Government For Bamboozling Investors

Elon Musk Tesla factory

Business Insider Samantha Lee

Musk had been accused of misleading investors when he tweeted that he was thinking of taking Tesla private.

Shares of Tesla dived 11 percent on Friday as Wall Street anxious the lawsuit could force Musk to step down and make it hard for the loss-making carmaker to raise more capital.

Musk denied the charges, saying in a statement, "This unjustified action by the SEC leaves me deeply saddened and disappointed". On the plus side, Musk would not need to admit guilt or relinquish his role as CEO.

Tesla's plunging stock price indicates investors want Elon Musk to quickly cut a deal with the Securities and Exchange Commission.

Thomas Gorman, a partner at the law firm Dorsey & Whitney and former SEC senior counsel, said Musk's statements, which he made on Twitter, weren't smart from a business perspective, but that doesn't necessarily mean Musk committed fraud.

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Incidentally, Musk in a blog post earlier this month said that Tesla is "about to have the most awesome quarter in our history, building and delivering more than twice as many cars as we did last quarter".

Electric vehicle news site Electrek reported that Tesla had produced 51,000 Model 3s with a couple of days left in the quarter, hitting its goal of 50,000 to 55,000 Model 3s.

To make matters worse, "Musk stated that he rounded the price up to $420 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 suit says. "As citizens of planet earth, we must show our support for innovation, for attempting to create a positive future, and for our fearless change agent of the world, Elon Musk", the shop description says.

Watch General Motors and Tesla trade here in real time.

Despite all this, investors haven't bailed on Tesla completely.

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Tesla makes the Model S sedan, Model X SUV and the Model 3 at its lone auto plant in Fremont, California.

At Friday's close, GM had a market capitalization of about $47.5 billion, according to Bloomberg data, while Tesla's was down to $45.17 billion.

"Without Elon, Tesla would be a debt-laden automaker that's burning a ton of cash", said David Whiston, an analyst with Morningstar in Chicago.

But extracting Musk from the company he has become synonymous with could devastate Tesla.

The very attributes that have fueled a mania around Elon Musk - his vision, brash personality and willingness to take risks - could prove to be his downfall.

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On Friday, Citigroup downgraded Tesla's stock to a sell rating from neutral , citing the SEC's suit.

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