Shares of Tesla plunged sharply on Thursday after after court documents showed that the Securities and Exchange Commission (SEC) is suing its CEO Elon Musk for fraud, The Wall Street Journal has reported.

Alleging that Musk misled shareholders when he tweeted he had secured funding for taking Tesla private, SEC will seek barring Musk from serving as an officer or director of any publicly traded US corporation.

In its complaint, the SEC said Musk knew he "had not agreed upon any terms for a going-private transaction with the Fund or any other funding source," and also charged that Musk "had no further substantive communications with representatives of the Fund beyond their 30 to 45-minute meeting on 31 July."

Musk had tweeted out on 7 August that he was considering taking his electric vehicle (EV) company Tesla Inc, private at $420 a share.

Musk called the SEC's allegations of fraud "unjustified" and said he acted in the best interests of investors.

"This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way," he said.

Tesla's stock dropped as much as 13 percent, to around $268, down from $307.52 as of the close.