(Reuters) – Shares in Tesla Inc could fall by a fifth in value as the AMERICAN Securities and Exchange Commission’s final attack on the Chief Executive Officer Elon Musk sees the controller again press for his removal, according to J. P. Morgan analysts.
A Tesla logo is shown on a ground-breaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China, January 7, 2019. REUTERS/Aly Song/Files
Tesla shares baptized 3 percent in trading before the bell on Tuesday, after the SEC alleged Musk had violated last year’s settlement of fraud charges by tweeting material information about the company, without the prior approval of the board of directors.
In a court filing on Monday, the supervisor pointed to a Musk Feb. 19 tweet: “Tesla 0 cars in 2011, but will be around the 500k in 2019,” noting that Musk not to, or received from, a pre-approval for the publication of this tweet, which was inaccurate and distributed at more than 24 million people.
Under the deal that the guidance from the supervisor of the lawsuit on the search for Musk is the removal of last year, the two parties have agreed that the material statements made by Musk on social media would be reviewed in advance by the company.
J. P. Morgan Securities analyst Ryan Brinkman said in a worst-case scenario, the SEC could again find Musk’s removal as CEO for the violation of the terms of the agreement.
Brinkman said that could push Tesla shares close to a one-year low. Tesla shares, amounted to $244.59 this past April, the lowest since the beginning of 2017, more than $50 below Monday close of $298.77.
“It is difficult to evaluate the likelihood of the return of this worst-case scenario … but on the other hand, the current accusations seem to be much less serious (than last year), Brinkman told clients in a note.
“If the SEC were to find Mr. Musk’s removal (perhaps subject to another settlement), we believe that the shares could approach the mid-$200 levels.”
Thirteen of the 32 Wall Street brokers now rate of the electric car company with a “buy” or higher. Eight it as a “hold” and 11 “sell” or lower, with a median of PT $327.50
Tesla ‘ s general counsel Dane Butswinkas, hired as an external consultant to help arrange the event at the SEC, resigned a day after Musk made the tweet in which the new SEC case refers.
Musk corrected his tweet four hours later to say that the “annual production” at the end of the year 2019 would probably be about 500,000, with deliveries expected to be about 400,000.
“Although this tweet (after trading hours), and the quick fix seems innocent enough, the SEC is not likely to cut Musk clearance,” said another analyst Gene Munster of Loup Ventures.
“Musk unwillingness to follow the rules is a part of what you must be prepared to accept as an investor in Tesla.”
Reporting by Vibhuti Sharma in Bengaluru; Editing by Patrick Graham and Bernard Orr