Cramer: What stands out in Elon Musk's SEC conflict 'is his hubris'

One thing stood out to CNBC's Jim Cramer as he parsed the U.S. Securities and Exchange Commission's complaint against Tesla co-founder and CEO Elon Musk.

"When you read the complaint about what Musk did — basically fabricating this bid to take Tesla private out of whole cloth, precisely in order to smash the people betting against his stock — the thing that stands out is his hubris," the "Mad Money" host said on Friday. "He tried to destroy the shorts, and in the process, ended up destroying himself."

What made matters worse, in Cramer's view, was Musk's reported refusal to agree to a no-guilt settlement with the SEC — a "slap on the wrist" that would have required Musk to pay a fine and step down as chairman of the board, but keep his role as CEO.

"The man is his own worst enemy," Cramer said, noting that Tesla's stock dropped nearly 14 percent on the news.

The "Mad Money" host also had a few points to make to investors who were still considering buying shares of the automaker.

"First, ask yourself, would you want to own the stock without Musk at the helm?" he asked. "Say what you will about his seemingly unhinged recent behavior, he's very good at selling people on his vision for the company. With Musk gone, I think a sizable number of investors will start viewing Tesla as merely a money-losing automaker."

Second, investors should be less worried about the SEC's lawsuit than about the Justice Department potentially getting involved in the investigation, a move that could spell serious trouble — potentially even jail time — for the outspoken CEO.

"I think it's too risky to own the stock while we wait to see if the other shoe drops," Cramer said. "Why? That brings us to the third problem: Tesla has some debt refinancings coming up real soon. [...] All of that just got a lot more difficult."

But because of its "cult stock" status, Tesla's stock has held up considerably well amid the Muskian chaos, the "Mad Money" host said.

And while Tesla's short-sellers might now feel emboldened, Cramer figured the bulls would "craft some fairytale narrative" that, if Musk wins out, he will stay at the helm and do an even better job making industry-disrupting cars after fighting off the SEC.

"Until Elon Musk is removed from the premises, the Tesla bulls will love the stock. If he somehow keeps his job, they'll be back as buyers," Cramer said. "They simply cannot resist the car or the man, even as I think his best defense at this point might be to invoke an insanity plea. My advice for you? Please, don't drink the Kool-Aid."

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