Tesla Inc shares hit a fresh two-year low in volatile trading on Friday as top boss Elon Musk's promise to not sell his shares in the electric-car company for at least two years did little to reassure investors.
Musk has offloaded shares worth $40 billion in the world's most valuable carmaker since late last year, with $15 billion worth of stock sales coming after he made similar pledges in April, partly to fund the acquisition of Twitter.
"If Musk sells another billion or so dollars of shares in the near future, and that exerts downward price pressure on Tesla's share price, investors might have a decent claim for securities fraud," said Howard Fischer, a former U.S. Securities and Exchange Commission (SEC) attorney and a partner at law firm Moses & Singer.
SEC rules require that public companies and their executives disclose accurate information that may be material to investors through channels that investors know to monitor. It does not usually specify how companies should do that.
"If this was another CEO of a Fortune 500 company making that statement, the market would be confident that 'he said it, so he's not selling,'" said Dennis Dick, head trader and market structure analyst at Triple D Trading.
Tesla shares are down 64% for the year, in what could be their worst annual performance since going public in 2010 as investors worry that Twitter was consuming much of the billionaire's time.
The stock was last down 0.6% on Friday after falling as much as 3.5% earlier to its lowest since September 2020.
Musk has had a history of trouble with the SEC.
Musk faced the regulator's ire for tweeting about his plan to take Tesla private in 2018 and was forced to step down as the company's chairman, appoint additional directors and pay $40 million in penalties. The SEC also demanded that controls be put in place to oversee Musk's communications.
"Musk looks rattled, vowing not to sell more stock and floating the idea of share buybacks. Short-sellers are firmly in control, and there is a lot of hesitation by retail to buy this dip," said Edward Moya, senior market analyst at OANDA.
Tesla shares have a short interest of about 3.1% of float shares, up by 33% since the start of the fourth quarter, according to S3 Partners.
(Reporting by Medha Singh, Srishti Achar, Chavi Mehta, Shubham Batra and Akash Sriram in Bengaluru, Chris Prentice in New York; Editing by Devika Syamnath and Anil D'Silva)
