Musk's fortune dropped by $1.5bn on Friday in NY, the day after the Securities and Exchange Commission accused the Tesla CEO of misleading investors with his infamous tweet last month about taking the electric-car maker private.
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.
The Securities and Exchange Commission filed a lawsuit against Tesla CEO Elon Musk on Thursday, seeking his ouster from the publicly traded company he founded over a tweet the mogul sent in August.
It's not clear that Musk will be removed, as he is denying the allegations, but the possibility jolted investors because Musk is seen as nearly synonymous with Tesla. On Friday, he tapped Chris Clark, a USA attorney who successfully defended Mark Cuban from insider-trading charges, to head up his defense.More news: Prosecutor to Ford: I'm 'Very Sorry' You Feel 'Terrified'
If the company stays public, however, Musk could be forced to take a back seat role or exit the company entirely. That's putting intense pressure on Musk and the board to stop the bleeding.
Musk reportedly refused to sign the deal as he felt by settling he would not be truthful to himself and he would not have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the report said.
Some analysts said the SEC's action was the beginning of a legal battle with authorities, short-sellers and other investors over Musk's actions that could cost Tesla heavily. Musk said he was "deeply saddened and disappointed" by this "unjustified action".
Barely a year ago, the stock reached an all-time high of $385 as investors grew optimistic about Tesla's lower-priced Model 3 sedan, the vehicle that is seen as critical to its goal of becoming a mass-market automaker. A Tesla bond issue due in 2025 yields more than 8%, against 6% for the average junk bond, reflecting investor concerns about the company.More news: Fortnite Season 6 Has Arrived, Includes Pets, Shadow Stones, and New Skins
"Elon's presence at the top of the company isn't required to maintain Tesla's brand equity", he said.
He said the share price is now "more faith-based" than rooted in the company's financial performance. Tesla has not responded to the news about the proposed settlement with the SEC.
"Despite this, we think the company will survive", he said.
Hanging in the balance is Tesla, the $45 billion emblem of America's future in battery-powered cars. Tesla is "still a powerful brand on its own", said Karl Brauer, executive publisher of Kelly Blue Book and Autotrader.More news: Russian Federation supplies Syria with new missile defence after friendly fire