On Thursday, the Securities and Exchange Commission sued Tesla CEO Elon Musk for making "false and misleading statements" about his claim that he could take the electric-car maker private at $420 a share.
The SEC sued Tesla Thursday afternoon for fraud over a comment Musk made on Twitter on August 7, where the billionaire said he was planning to take the company private and had secured funding for the deal. In early August, he tweeted the news that he would take Tesla private, sending the automaker's shares soaring.
Tesla's future looks on a knife-edge as investors question whether the electric auto company can survive with founder Elon Musk at the wheel.
In a complaint filed in federal court in Manhattan, the agency said Musk either "knew or was reckless in not knowing" that a series of statements he made about taking his company private were false or misleading.
The commission is trying to show that Mr. Musk never got a firm or detailed offer to take the company private.
The Silicon Valley billionaire, who within three weeks of the tweets had abandoned the plan to delist Tesla, said overnight he had done nothing wrong and the company's board reiterated its support for him.
"His ego is so clearly tied to the company, so what would be best for Tesla's investors would be for him to realize the company is more important than his ego", Munster said. In a now infamous tweet he wrote: "Am considering taking Tesla private at $420".
The cost of insuring Tesla debt against default rose to its highest price ever on Thursday and the plummeting share price attracted new short sellers, who bet against the stock. Cowen analyst Jeffrey Osborne wrote on Friday that he thinks Tesla will need to raise $2 billion in the fourth quarter.
In its complaint, the SEC is seeking a court-mandated bar prohibiting Musk from serving as an officer or director of a public company.
Shares of Tesla dived 11 percent on Friday as Wall Street anxious the lawsuit could force Musk to step down and make it hard for the loss-making carmaker to raise more capital.
As it stands, Musk's future with Tesla remains unclear.
Under the terms of the deal, Musk and Tesla would have had to pay a nominal fine, and he would not have had to admit any guilt.
For the billionaire entrepreneur, it was the latest self-inflicted wound from a series of vehicle crashes that have battered Tesla's share price and Musk's reputation.
There's also a chance that Musk and other Tesla executives could face further legal action, potentially including criminal charges.
Analysts and experts told CNN the SEC lawsuit brings a scourge of uncertainties to Tesla (TSLA), which is already grappling with intense business pressure.
Despite all the negative headlines, Tesla's board of directors said Thursday they "are fully confident in Elon, his integrity, and his leadership of the company".