Meanwhile, Tesla shares continued to plummet in after-hours trading, falling over 15 percent from its daily high of $312 to its lowest denomination of $265. "An officer's celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly".
Musk stated on Thursday that the SEC's allegations were "unjustified" stating: "I have always taken action in the best interests of truth, transparency and investors".
There is about a 25 percent change Musk remains CEO of Tesla now that the SEC is suing the company, said Gene Munster, a managing partner of venture capital firm Loup Ventures, which invests in technology companies. "Integrity is the most important value in my life and the facts will show I never compromised this in any way".
"Despite this, we think the company will survive", he said.
"You can't make full disclosure in 280 characters", he said, referring to the length limit of a tweet.
Musk has hired to defend him in this case former assistant USA attorney Chris Clark of Latham & Watkins and Stephen Best at Brown Rudnick, who successfully defended internet billionaire Mark Cuban in an insider trading case, according to people familiar with the plans who asked not to be identified. Now the case looks set to go to court, another headache for Musk to deal with.
Tesla was not immediately available for comment.
Grundfest also said that the challenge for the SEC is to "appropriately discipline Musk while not harming Telsa's shareholders".
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The SEC's lawsuit, filed in Manhattan federal court, caps a tumultuous two months set in motion on August 7 when Musk told his more than 22 million Twitter followers that he might take Tesla private at $420 per share, with "funding secured". 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. According to CNBC, Musk could not accept that deal.
Tesla shares were down down less than 1% this year through Thursday.
Four early research notes from Wall Street analysts and brokerages all said that Musk might have to resign.
"When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a 'special goal fund, ' and had not confirmed support of Tesla's investors for a potential going-private transaction".
Elon Musk's run-in with the Securities and Exchange Commission may cost Tesla Inc. nearly half its market capitalization, Barclays analyst Brian Johnson said, adding that the company's stock has about US$130 of "Musk premium" per share that could dissipate.
Mark Spiegel, a short-seller and constant Musk critic, applauded the SEC for pursuing what he predicted would be easy for the government to prove.
"They should have fired him a long time ago".
The board too issued a statement in support of Musk, saying it was "fully confident in Elon, his integrity and his leadership of the company".