Tesla shares drop after Greenlight Capital slams Musk for mocking the SEC | Tech Industry
Shares of Tesla Inc fell 7 percent on Friday after David Einhorn’s hedge fund Greenlight Capital slammed the electric carmaker, adding to losses sparked by CEO Elon Musk mocking the U.S. Securities and Exchange Commission on Twitter.
Musk stirred nerves about a settlement of his securities fraud lawsuit by calling the SEC the “Shortseller Enrichment Commission” on Twitter, just hours after a federal judge ordered him and the regulator to justify their settlement.
“Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work,” Musk, a frequent critic of investors betting against the electric car company said in the tweet on Thursday. “And the name change is so on point!”
In its quarterly letter, Greenlight said its short position on Tesla was its second-biggest winner in the third quarter. The hedge fund said Musk has been deceptive and the carmaker’s woes resemble those of Lehman Brothers before its collapse.
The electric carmaker’s shares plunged last week after the SEC accused Musk, 47, of fraud over “false and misleading” tweets on Aug. 7 that promised to take Tesla private and said funding had been secured.
The lawsuit threatened to pull Tesla and Musk into a long drawn-out fight that could have undermined the company’s operations and ability to raise capital.
In the settlement that was announced over the weekend, Tesla and Musk instead agreed to pay $20 million each to the regulator while the billionaire – also a large Tesla shareholder – would step down as chairman but continue as CEO.
The settlement also provided for the appointment of a new chairman and directors to balance Musk’s influence at the company as well as moves to oversee his output on social media.
Peter Haveles, a partner in the Trial and Dispute Resolution Practice Group, said Musk’s tweets showed his lack of self discipline and puts intense pressure on Tesla board.
Several Twitter users also criticized Musk, who has over 20 million followers on the social media platform, for his tweets targeting regulators and short sellers.
“I have lost 30 years of my life savings all in $tsla thanks to your tweets please stop,” TrendTrader007 wrote.
“If you continue this self destructive path you will lose all your ardent supporters and the goodwill from diehard $tsla longs like me,” the user tweeted.
Teresa Goody, a former SEC attorney and CEO of The Goody Group, said Musk’s contempt for the regulator shows how “he is undercutting the fair and efficient execution of the markets”.
“He may have not had the intent to violate securities laws, but his tweet shows that he is happy to cost an investor money.”