SEC sues Elon Musk over the $420 tweet

The US Securities and Exchange Commission has formally accused Elon Musk of misleading investors when he tweeted that he had funding lined up to take Tesla private at $420 a share. The SEC intends not only to impose a fine, but also seeks to bar Musk from serving as officer or director of a public company.

The agency says that Musk’s claim in his August tweet that he had “funding secured” was false.  “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC says in its complaint.

“Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day,” the SEC said. “He did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required. Musk’s false and misleading statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.”

The cute reefer reference (420) was suggested by Musk’s girlfriend, Canadian singer and songwriter Grimes, according to the agency.

“It’s unusual for a case of this significance to move this quickly, in particular when you’ve got a high-profile individual,” said former SEC attorney Robert Long. However, the agency “could have conducted its investigation quickly” because it was focused on only a few fateful tweets.

In addition to the SEC suit, Bloomberg reported that the Justice Department is also looking into whether Musk misled investors.

The stock market was expecting the SEC suit, but apparently not the drastic demand that Musk step down as CEO of Tesla – TSLA stock retreated from its recent rally, and then some, in after-hours trading.

The Wall Street Journal reported that the SEC drafted a settlement with Musk that was approved by the agency’s commissioners, but Musk’s lawyers call to pull out on Thursday morning.

“This unjustified action by the SEC leaves me deeply saddened and disappointed,” said Musk. “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.”

 

Source: Bloomberg, Wall Street Journal

 

  • Jim Young

    He made a big mistake, I think, but I also recall Alan Greenspan saying something like the market doesn’t need regulators, a free market is self correcting.

    I do believe in oversight and basic, but flexible regulation more quickly adaptable to dangerous trends.

  • Brian Couchene

    I read somewhere that the fine, even if proven guilty, was relatively inconsequential. I don’t know if the SEC has the authority to forcibly remove a CEO from a company… They can “recommend” until they are blue in the face, but investors believe in Elon Musk as they did of Steve Jobs. These sponsored attacks won’t cease until the competing oil companies are put out of business.
    Hopefully this doesn’t get Musk down too much. He didn’t do anything near as bad as other CEO’s are doing on social media these days… Heck Trump is doing much worse on social media without consequence.

  • Pedro Cardenas

    Stupid mistake by a brilliant guy. Even Elon has to play by the rules.