Tesla Shares Tumble As Judge Asks SEC To Justify Musk's Sweetheart Deal

Every Tesla bear who watched in disbelief as the company's shares rocketed higher on Monday should be thanking U.S. District Judge Alison Nathan.

That's because Nathan, who is ultimately responsible for ratifying Musk's sweetheart deal with the SEC, has reportedly asked both Musk AND the SEC to explain "why [the deal is] fair and reasonable." An explanation that - we're sure - many market participants and securities law experts would also be eager to hear.


Tesla shares dropped 5.3% on the news, which has reopened the possibility that Musk might be outed as Tesla CEO, threatening the considerable "Musk premium" that has for years been the most relevant factor in determining the value of Tesla stock.

Tesla shares erased nearly all of their gains from September last week when Musk revealed that he would fight the SEC as it sought to hold him accountable for a reckless tweet announcing that he had secured private funding to take Tesla private at $420 a share. The agency revealed that Musk knew the tweet was disingenuous - in fact, the $420 figure was meant to be "an inside joke" between Musk and ex-girlfriend, the Canadian musician Grimes (the figure represented a 20% premium over Tesla's share price at the time, plus $1). 

But after Musk rejected the SEC's initial offer, sending shares lower, he changed his mind and agreed to pay a $20 million penalty (while Tesla would pay another $20 million) and surrender his chairman role on the company's board. He also agreed to pre-clear tweets with the company in the future.