Tesla Shares Down 10% After SEC Sues Elon Musk

(RTTNews) - The Securities and Exchange Commission Thursday filed a lawsuit against Tesla Inc. (TSLA) CEO Elon Musk for fraud. Shares of the luxury electric car maker is down 10 percent on the extended session following the news.

The complaint, filed in federal court in the Southern District of New York, alleges that Musk cheated investors when he tweeted that he was planning to take the company private and had funding secured.

The SEC complaint alleges that Musk issued "false and misleading" statements and failed to properly notify regulators of material company events.

In August, Musk tweeted that he is "considering" to take the luxury electric maker private at about $70 billion. Musk said he secured the funding from a Saudi wealth fund.

Several weeks later the company said that Tesla will remain a public company. Six of Tesla's directors James Murdoch, Antonio Gracias, Robyn Denholm, Brad Buss, Ira Ehrenpreis and Linda Johnson Rice said Musk dropped the plan to take the company private. "The Board and the entire company remain focused on ensuring Tesla's operational success, and we fully support Elon as he continues to lead the company moving forward."

"According to Musk, he calculated the $420 price per share based on a 20% premium over that day's closing share price because he thought 20% was a 'standard premium' in going-private transaction," the SEC claims in the suit, according to CNBC.

"This calculation resulted in a price of $419, and 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 funny, which admittedly is not a great reason to pick a price.'"

TSLA closed Thursday's trading at $307.52, down $2.06 or 0.67%, on the Nasdaq. The stock further dropped $30.52 or 9.92% in the after-hours trade.