Elon Musk Is Having a Very Bad Week. So Are Tesla Investors

The Securities and Exchange Commission's complaint accusing Tesla CEO Elon Musk of committing stock market fraud paints a picture of a man who is either a liar or a reckless leader.

Tesla and Musk are perceived as inseparable by many investors, with some industry analysts putting his value baked into each Tesla share in excess of $100.

Sources familiar with the matter tell CNBC that the deal would have allowed Tesla and Musk to pay a nominal fine.

Tesla has always weathered these storms, and its continued ability to stay afloat amid these challenges is enough to convince many that the electric auto company will be around for a while yet.

At the same time, a report surfaced that Musk backed out of an eleventh-hour settlement offer from the Securities and Exchange Commission that would have forced him to step down as chairman for only two years. But they were still informal talks that didn't justify Musk tweeting a week later that funding had been secured for a buyout at $420 per share. Musk has said that he posted the go-private tweet while driving to the airport and that no one reviewed it.

Musk clearly thinks Tesla can not run without him.

Stock prices rose almost nine percent following Musk's announcement of securing privatization funding, resulting in the SEC opening an investigation to ensure that the CEO was in accordance with his legally required fiduciary duties.

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Gene Munster, managing partner at venture capital firm Loup Ventures, said the lawsuit adds further distraction at a critical six-month juncture in the company's viability.

The complaint alleges that Musk's tweet harmed investors who bought Tesla stock after the tweet but before accurate information about the funding was made public.

The SEC said Tesla's head of investor relations responded thusly: "I can only say that the first tweet clearly stated that "financing is secured".

Tesla shares were down down less than 1% this year through Thursday.

Here are five things to know about the allegations being made by the SEC in a case that could spell the end of Musk's reign at the electric vehicle maker that he co-founded.

"Tesla and the board of directors are fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century". The department of justice too is now looming into Musk's tweets and could bring a criminal case if it finds he deliberately misled investors. In other words, Musk wouldn't take the settlement because that would imply that he did something wrong, and he doesn't think he did.

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