Tesla shares dropped more than 13 percent in after-hours trading Thursday after the Securities and Exchange Commission filed securities fraud charges against CEO Elon Musk. The SEC alleges in a complaint filed against the CEO that Musk lied when he tweeted on August 7 that he had “funding secured” for a private takeover of the company at $420 per share. The SEC complaint, filed in federal district court in the Southern District of New York, said the tweets were “false and misleading.” The SEC, which said the tweets led to “significant market disruption,” is seeking civil penalties without noting an amount and to bar Musk from serving as an officer or director of a public company. Am considering taking Tesla private at $420. Funding secured. — Elon Musk (@elonmusk) August 7, 2018 Musk sent a statement Thursday afternoon calling it an unjustified action. In August, Musk sent a tweet that he had secured funding and was considering taking Tesla private. The tweet wasn’t warmly embraced by the Tesla board or many shareholders and it’s what prompted the SEC to investigate. Several weeks later the company posted a blog announcing that Tesla will remain a public company.<doc-sep>Shares of Tesla dropped sharply in after-hours trading Thursday after court documents showed the Securities and Exchange Commission is suing Elon Musk for fraud. Sources close to the company told CNBC the company was also expecting to be sued, though Tesla was not named as a defendant in the complaint. Tesla's stock dropped as much as 13 percent, to around $268, down from $307.52 as of the close. Musk, the company's CEO, tweeted last month he was thinking about taking Tesla private, noting: "Funding secured." Tweet The Aug. 7 tweet sent Tesla shares flying, and they closed 11 percent higher on the day. After sending the tweet, Musk claimed he had been in talks with the Saudi Arabian sovereign wealth fund and was confident he'd have the funding to take the company private at $420 a share. Tesla abandoned its plans to go private later in August. "The SEC is looking at it very seriously. The stock is going to be under pressure while this gets resolved, and obviously these things take time. The SEC obviously has fired the first shot," said Art Hogan, chief market strategist at B. Riley FBR. "It sounds like the company's first communication was to defend." Tesla since Aug. 7 Source: FactSet In its complaint, the SEC said Musk knew he "had not agreed upon any terms for a going-private transaction with the Fund or any other funding source," adding Musk had "had no further substantive communications with representatives of the Fund beyond their 30 to 45 minute meeting on July 31." Regardless, the stock has been a roller-coaster ride for investors ever since the infamous Aug. 7 tweet. Since popping that day, the stock has dropped 19 percent through Thursday's close. Colin Rusch, an analyst at Oppenheimer with a buy rating and a $385 price target on Tesla, told CNBC's "Closing Bell" the stock, and the company, can recover from this. "The potential for this platform is generating an awful lot of cash flow," Rusch said. If "they implement some fiscal discipline around growth and increment operating margins, we do think there is still an awful lot of capital that is still very bullish on this name and will continue to buy the name even with this sort of overhang." — CNBC's Patti Domm contributed to this report. WATCH: Munster thinks there's a 25% chance Musk remains Tesla CEO<doc-sep>The Securities and Exchange Commission accused Tesla CEO Elon Musk of securities fraud Thursday in a civil lawsuit charging him with lying or recklessly misleading when he tweeted that he had "funding secured" to take the electric car company private. In doing so, the Wall Street regulatory agency set in motion a legal showdown with tremendous stakes that could culminate in Musk's removal from Tesla leadership and cause serious financial damage to the company. Though Musk claimed in a series of tweets Aug. 7 that he had arranged a deal to take Tesla private, he "had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the SEC alleged in a complaint filed in federal court in New York City. Besides financial penalties, the SEC is asking the federal court to block Musk from leading a public company or serving on the board of one, which would require him to leave Tesla. Such an outcome would qualify as a crushing fall for an innovator who has set his sights on revolutionizing the automotive and energy industries. "We allege that Musk’s statements were false and misleading because they lacked any basis in fact," said Stephanie Avakian, co-director of the SEC's Division of Enforcement, at a press conference Thursday. Talking Tech:Search these terms on Google's 20th birthday for a fun surprise Talking Tech:How an Iowa video game nerd makes up to $500,000 a year playing Fortnite Talking Tech:Season 6 of 'Fortnite' is here: Everything you need to know Musk has maintained that plentiful funding was available to turn Tesla into a private entity, which he briefly argued would help Tesla focus on long-term growth. He had said that Saudi Arabia's sovereign wealth fund effectively offered to finance the deal, though the fund has not confirmed that. “This unjustified action by the SEC leaves me deeply saddened and disappointed," Musk said Thursday in a statement. "I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.” The SEC charges focus on a series of tweets in which Musk told his approximately 22 million Twitter followers that he was considering a multi-billion dollar transaction that would take Tesla private at $420 per share — a significant premium to the price at the time. During the next three hours, Musk tweeted his hope that current Tesla investors would remain with the company even if it became private but that investors could sell or continue to hold their shares. He said investor support had been confirmed. His proposed price assumed a 20 percent premium on Tesla shares, plus "rounding up to $420 because of the significance of that number in marijuana culture and his belief that his girlfriend would be amused by it," Steven Peikin, co-director of the SEC Division of Enforcement, said at the news conference after the court filing. More:For Elon Musk, star-touched vision and messy reality collide More:Thai cave diver sues Elon Musk for defamation over 'pedo guy' tweet Between the time of Musk's first tweet and the close of trading on August 7, Tesla shares gained more than 6 percent in value on significantly increased volume, the complaint said. The shares have since declined sharply in value. In after-trading hours Thursday, when the complaint was filed, shares of Tesla plunged 11.8 percent to $271.52. “Elon Musk and Tesla have a history of skirting traditional operational standards and spinning negative press," said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, in an email. "But there’s no spinning this one. An SEC lawsuit seeking to bar Musk from running Tesla, or any public company, is bad news on a personal and corporate level." Citing the initial market reaction, the SEC said Musk's alleged false and misleading statements "caused significant confusion and disruption in the market for Tesla's stock and resulting harm to investors." The agency noted that Tesla insiders were confused about the statements and fielded inquiries from journalists asking if the CEO was joking. "The company's head of investor relations sent a text to Musk's chief of staff asking, 'Was this text legit?'" the court complaint said. As one sign of the major hurdles to any deal that would take Tesla private, the SEC complaint cited an Aug. 6 conversation Musk had with a private equity fund partner experienced with such transactions. In the executive's experience, the deal structure contemplated by Musk was "unprecedented," the SEC complaint alleged. In many major fraud cases brought by the SEC, companies seek to resolve them without allowing the federal courts to reach a verdict. "In the worst case there will be a settlement with some penalty to Elon Musk," said Trip Chowdhry, managing director of equity research at Global Equities Research, in an email. Former SEC enforcement official Alma Angotti, now serving as managing director of risk and compliance at Navigant Consulting, said the case could indeed result in Musk's removal. "If they can prove that he knew it was false and misleading, or if he was reckless, they have a pretty good" case for securities fraud, Angotti said in an email. It was not immediately clear Thursday whether Musk would mount a fiery defense, seek a deal or somewhere in between. But he is widely known in corporate America for his combative style. For Tesla, which is currently trying to ramp up manufacturing of its critical Model 3 electric sedan, a future without Musk would raise serious questions about the company's direction. Despite the urging of many analysts, Musk has not hired a chief operating officer to serve as a clear No. 2 executive to improve Tesla's operations, including its manufacturing efficiency. Contributing: Chris Woodyard<doc-sep>Engineer and tech entrepreneur Elon Musk of The Boring Company talks about constructing a high speed transit tunnel at Block 37 during a news conference on June 14, 2018 in Chicago, Illinois. The SEC lawsuit against Elon Musk for alleged fraud, which the parties settled in a surprise announcement on Saturday, isn't the only legal action against the Tesla CEO for his Aug. 7 take-private tweet. The Justice Department is also investigating the matter, in which Musk claimed to have "funding secured" to take Tesla private at $420 a share. The Securities and Exchange Commission filed its suit on Thursday, but struck an agreement with Musk and Tesla two days later. Both will have to pay $20 million apiece for the fiasco. The new charges and investigation followed a proposed class-action lawsuit led by Andrew Left of Citron Research, a short seller, who says Tesla and Musk manipulated the stock price by issuing materially false and misleading information in tweets. Here are some of the investigations, complaints and suits that could most affect Tesla: NHTSA and NTSB regularly investigate crashes involving Tesla vehicles and the use of "Autopilot" features. OSHA has multiple investigations looking into worker safety and injuries at Tesla factories. In a lawsuit, former Tesla sales manager Adam Williams claims the company demoted then fired him after he complained they sold used cars to customers without disclosing those cars were previously lemons. A former Tesla technician, Martin Tripp, filed a whistleblower complaint to the SEC claiming Tesla misrepresented its rate of vehicle and battery production and used flawed materials in its car batteries. Separately, Tesla fired and then sued Tripp on charges of leaking company data to the media and engaging in sabotage. Tripp has countersued the company for defamation. A former Tesla security employee, Karl Hansen, filed a separate whistleblower complaint to the SEC claiming Tesla covered up theft and narcotics trafficking reported by employees at its battery plant in Sparks, Nevada. A former employee, Marcus Vaughn, is pursuing a class-action lawsuit against Tesla in California alleging that the company ignored black employees' reports of rampant racism. A Tesla attempt to force this case into arbitration was denied in June. The National Labor Relations Board filed a complaint in August accusing Musk of violating labor laws with a tweet on May 20 that employees wouldn't have stock options if they formed a union. Tesla-owned SolarCity is the subject of multiple and as yet undisclosed SEC probes discovered by Probes Reporter, a firm that publishes FOIA research for investors.<doc-sep>
Elon Musk has been charged with securities fraud by U.S. Securities and Exchange Commission after tweeting plans to take Tesla Inc. private Elon Musk Charged with Securities Fraud by SEC After Tweeting Plans to Take Tesla Private Tesla CEO Elon Musk has been charged with securities fraud by the U.S. Securities and Exchange Commission. The charges stem from a tweet the 47-year-old billionaire wrote in August, which detailed plans to take Tesla private. “Am considering taking Tesla private at $420. Funding secured,” Musk wrote. According to the SEC’s complaint, Musk’s tweet stirred up significant confusion among investors and “caused Tesla’s stock price to jump over six percent,” the SEC revealed in a press release. The complaint also claims Musk’s plans were not discussed “with any potential financing partners, and he allegedly knew that the potential transaction was uncertain and subject to numerous contingencies.” RELATED VIDEO: Elon Musk’s Estranged Father Had a Baby with His Stepdaughter “Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” Co-Director of the SEC’s Enforcement Division Steven Peikin said. “An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.” Co-Director of the SEC’s Enforcement Division Stephanie Avakian added, “Taking care to provide truthful and accurate information is among a CEO’s most critical obligations.” “That standard applies with equal force when the communications are made via social media or another non-traditional form.” In addition, the SEC’s complaint is asking that Musk be dismissed as CEO as he “violated antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company.” The investigation is still ongoing. Musk addressed the charges in a statement to PEOPLE, “This unjustified action by the SEC leaves me deeply saddened and disappointed.”