Tesla Inc. (TSLA) pared declines to 13.5% to $307.52 per share as of 6:15 p.m. in New York as the Securities Exchange Commission announces fraud charges against the company's founder, Elon Musk.
The complaint, which have been filed in Manhattan District Court, states that the case includes "a series of false and misleading statements made by Elon Musk" regarding taking Tesla private.
"Musk's statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at purchase price that reflected a substantial premium over Tesla stock's then-current share price,"
Musk's infamous tweet on August 7 suggested he had funding to take the company private at $420 per share.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018.
That price would represent a nearly 30% premium on today's closing price. Tesla's shares were $379.57 at close on August 7.
Per the complaint, Musk's tweet was an unfortunate marijuana-related joke.
"He rounded the price up to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend 'would find it funny, which admittedly is not a great reason to pick a price,'" the complaint reads.
Musk has been hounded by fraud accusations since the tweet, which was accused of being a fabrication to inflate the stock price and crush shorts.
Oh and uh short burn of the century comin soon. Flamethrowers should arrive just in time.— Elon Musk (@elonmusk) May 4, 2018
Given the tumultuous nature of the stock, some experts think a trading opportunity might be available if that charts look right.
Dan Botti, Principal at Peregrine Asset Advisers, a Seattle-based asset management firm that held 15, 023 shares of Tesla as of June 30.
Botti said the firm has since exited the stock. However, he did not eschew the stock's opportunity entirely on the basis of the news this evening.
"I would like to wait and see if it does make a low on the news today," he said. "The feeling on the street is that this quarter that they are in is great, so I'd wait for a bottom and trade on the rumors."
He explained that finding the bottom is the hardest part.
"You have to wait and look at the formation of the charts," he said.
Botti added that the news is not yet celebratory for shorts yet, as the drop to the low 270 range is still not even as low as the stock traded earlier this month.
When asked if he might be taking his own advice and jump in on the stock again based on the bottom, Botti joked that the volatility is reminiscent of the cannabis stock sector.
"Would I personally be investing in Tesla right now?" he asked. "Would I rather invest in Tesla or Tilray? I'd rather invest in a company that has a more stable upside."