Elon Musk is the heart and soul of Tesla. If the SEC gets its way, he could have to step down.
The real shocker is the SEC wants a judge to bar Musk, the company’s chairman and CEO, from serving as an officer or director of a public company.
“This is a nuclear threat to force him to settle,” said John Coffee, a professor at Columbia Law School.
The news rocked Wall Street. Tesla () shares plummeted 12% in after-hours trading.
“Tesla without Elon Musk is worth some substantial fraction less,” Coffee said. “The penalty really falls on Tesla shareholders. Who is going to run that company?”
Musk defended himself, calling the SEC lawsuit an “unjustified action” that leaves him “deeply saddened and disappointed.” The CEO said he has always taken action “in the best interests of truth, transparency and investors.”
How serious are the SEC’s accusations?
The agency chose to charge Musk under Rule 10b-5 of the Exchange Act. That’s what the SEC uses to go after insider traders and market manipulators.