How much trouble is Elon Musk in?

Tesla and Elon Musk have always made big promises. Now those promises could cause big problems.The re...

Posted: Aug 21, 2018 5:46 AM
Updated: Aug 21, 2018 5:46 AM

Tesla and Elon Musk have always made big promises. Now those promises could cause big problems.

The reason is simple: When companies make promises, shareholders count on them. And when companies fail to deliver, it can cause legal trouble.

The Securities and Exchange Commission is reportedly looking at Musk's tweet earlier this month that he had "funding secured" to take Tesla private. Musk's surprise announcement briefly sent the stock soaring.

Musk later explained that he was talking about a meeting he had had with officials of the Saudi sovereign wealth fund. He said he left the meeting with "no question" that a deal could be closed.

But he gave no indication — and still hasn't — that he had "secured" funding.

Regulators are reportedly looking at other Tesla promises, too.

The Wall Street Journal reported Friday that the SEC has subpoenaed a Tesla parts supplier in a probe into whether it misled investors last year about production of the Model 3, Tesla's least expensive electric car.

Musk originally projected the company would turn out 1,500 of them in the third quarter of last year, but it built only 260. Tesla expected to ramp up to 5,000 per week by the end of 2017, but it took six months longer.

It's possible the SEC inquiries result in no sanctions. But Musk could face a range of penalties if the SEC determines he was purposely deceptive in his tweet, or his predictions about the Model 3.

Those penalties range from a slap on the wrist to a fine to a ban on serving as an officer of a publicly traded company. The ban could be temporary or permanent, though experts say the latter is extremely unlikely.

"The SEC wants cases where the deception is black-and-white," said Brad Bennett, a securities lawyer who was formerly director of enforcement for the Financial Industry Regulatory Authority. "It doesn't want a case where things that turn on his selection of vocabulary."

Those are all civil penalties. Criminal charges are reserved for officers who are accused of repeatedly and willfully presenting false information.

But even if the SEC doesn't find he crossed the line, Musk and Tesla face legal problems from shareholder suits.

Investors have already filed two lawsuits against Tesla over Musk's "funding secured" tweet.

And a class-action suit filed by investors in federal court last year questions the Model 3 projections.

Tesla argues in that case that the Model 3 forecasts were within reach at the time, and that it even warned the task would be difficult. Tesla is seeking to have the suit thrown out; a hearing is set in San Francisco for the end of this month.

Beyond the legal problems, Tesla is at risk of losing some potential customers who are apparently frustrated with the company's failure to keep its promises.

Customers have to put down a refundable $1,000 deposit to reserve a Model 3, then pay $2,500 more when the time comes to choose the specific version they want to buy.

More than 300,000 customers put down the deposits during the first week that Tesla accepted orders, in April 2016. Now customers are increasingly seeking refunds, according to Rajvindra Gill, an analyst for Needham & Co.

Tesla denied a claim by Gill that refunds were outpacing new deposits for the Model 3. And this month it reported that the amount of money held on deposit from customers rose during the second quarter, suggesting that new orders are still increasing.

Tesla declined to comment on the reports of the various SEC probes, as did the agency.

— CNNMoney's Jordan Valinsky contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 307519

Reported Deaths: 7096
CountyCasesDeaths
DeSoto20772248
Hinds19888408
Harrison17489302
Rankin13311275
Jackson13097243
Madison9895210
Lee9856169
Jones8290160
Forrest7523146
Lauderdale7187237
Lowndes6262144
Lamar610584
Lafayette6027117
Washington5280132
Bolivar4769129
Oktibbeha455297
Panola4442103
Pearl River4419139
Warren4280118
Marshall4273100
Pontotoc416472
Monroe4057132
Union403675
Neshoba3987176
Lincoln3869108
Hancock372085
Leflore3468124
Sunflower329389
Tate322681
Pike3180104
Scott310572
Yazoo304368
Alcorn297764
Itawamba296776
Copiah292965
Coahoma289677
Simpson287484
Tippah284668
Prentiss275659
Marion265779
Wayne261341
Leake261073
Grenada254982
Covington254580
Adams245882
Newton244859
George237847
Winston225981
Tishomingo222067
Jasper219748
Attala213273
Chickasaw204857
Holmes186471
Clay182454
Stone179131
Clarke176876
Tallahatchie175240
Calhoun163230
Yalobusha158836
Smith158534
Walthall130543
Greene129433
Lawrence126223
Noxubee125933
Montgomery125542
Perry125138
Carroll120826
Amite120041
Webster113432
Jefferson Davis105432
Tunica102525
Claiborne101330
Benton97225
Kemper95226
Humphreys94332
Franklin81823
Quitman78916
Choctaw72817
Jefferson64828
Wilkinson64727
Sharkey49617
Issaquena1686
Unassigned00

Alabama Coronavirus Cases

Cases: 518899

Reported Deaths: 10712
CountyCasesDeaths
Jefferson753641487
Mobile37763798
Madison33859494
Tuscaloosa25266443
Montgomery23962565
Shelby23106238
Baldwin20631300
Lee15524165
Calhoun14284311
Morgan14139268
Etowah13662345
Marshall11957219
Houston10380278
Elmore9993200
Limestone9811147
Cullman9470188
St. Clair9426234
Lauderdale9215227
DeKalb8746181
Talladega8058171
Walker7087275
Jackson6754110
Autauga6723103
Blount6483135
Colbert6203130
Coffee5399112
Dale4767110
Russell428838
Franklin419982
Chilton4083109
Covington4053114
Tallapoosa3893146
Escambia387674
Dallas3527149
Chambers3499122
Clarke346360
Marion3065100
Pike305875
Lawrence295395
Winston272372
Bibb256258
Marengo248661
Geneva245875
Pickens232959
Barbour224755
Hale218775
Butler212266
Fayette208960
Henry187844
Cherokee182044
Randolph176941
Monroe171440
Washington164038
Macon154548
Clay149354
Crenshaw149257
Cleburne146041
Lamar139234
Lowndes136453
Wilcox124327
Bullock121340
Conecuh109028
Perry107926
Sumter102932
Coosa99228
Greene90734
Choctaw58724
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