Shares of Tesla plunged.
Investors worried that the Securities and Exchange Commission lawsuit could force chief executive Elon Musk to step down.
And that that could make it difficult for the loss-making carmaker to raise money.
The SEC sued Musk for securities fraud over his tweet from early August, in which he said he wanted to take Tesla private and had funding secured.
Musk later backed out of the plan.
CNBC reported that he also pulled the plug on a no-guilt settlement with the SEC that would require paying a nominal fee, barring Musk from being chairman for two years, and appointing two, new, independent directors.
The Phoenix Group's chief economist Max Wolff:
(SOUNDBITE) (English) THE PHOENIX GROUP'S CHIEF ECONOMIST MAX WOLFF, SAYING:
"So, I'm not sure he should step down. The company in a sort of a tough situation, but he has to control himself or leave, right? I think, actually, for the company the best thing would be for him to make settlements and control himself, because, when he's not acting out and being the sort of bad boy of tech, he's actually been pretty good at being a salesman and spokesman for his company, which has been able to get valuations far above what its financials suggest in part because of his charisma and salesmanship. So, the sad thing is if he can't control himself he has to leave. And that probably spells further trouble for the company."
At least five research firms said Musk might have to resign following the SEC lawsuit.
Some analysts said SEC's action was just a beginning of a legal battle with authorities, short-sellers, and other investors over Musk's actions.