Tesla CEO Elon Musk is reportedly facing some serious consequences for statements he shared online. It’s no secret that Musk has an influential presence on social media, and has for a long time. As one of the richest people in the world, there are always millions latching on to every word Musk says. Though, with great power comes great responsibility. Despite how busy the Tesla CEO is, he still is surprisingly active on twitter. One investor is opening a lawsuit against Musk’s’ company, Tesla. The lawsuit alleges that tweets from Musk devalued stock shares for the company.
In 2019, the Securities and Exchange Commission (SEC) charged Tesla with “failing to have required disclosure controls and procedures relating to Musk’s tweets.” The settlements called for reform at Tesla. One of the lawsuit’s requirements was that Musk no longer serve as chairman at the company. Additionally, Tesla appointed two independent directors to its board, per settlement requirements. The settlement also required a committee for overseeing Musk’s communications, and for both Musk and Tesla to pay hefty fines. A press release on the SEC website gives more insight into the situation.
Taking a Look at Elon Musks’ Tweets
A portion of the statement reads, “According to the SEC’s complaint against him, Musk tweeted on August 7, 2018 that he could take Tesla private at $420 per share… A substantial premium to its trading price at the time…That funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote. The SEC’s complaint alleged that, in truth, Musk knew that the potential transaction was uncertain and subject to numerous contingencies. Musk had not discussed specific deal terms, including price, with any potential financing partners…His statements about the possible transaction lacked an adequate basis in fact. According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over six percent on August 7…[And] led to significant market disruption.”
The statement also explains that, “Tesla had no disclosure controls or procedures in place to determine whether Musk’s tweets contained information required to be disclosed in Tesla’s SEC filings.”
Is Tesla Following Rules Set Out by the SEC?
It’s currently unclear if Musks’ tweets are being reviewed. This most recent lawsuit is coming from investor David Wagner. Wagner is a Tesla shareholder himself, filing the suit in Delaware. According to a report, Wagner’s litigation calls for a deeper look into Elon Musk’s twitter activity, in order to determine if the billionaire is in fact violating the terms of the previously laid out 2019 agreement in regards to his social media activity as it relates to Tesla. The terms called for a securities lawyer to pre-approve tweets from Musk before being posted to the public, but it’s unclear who exactly is reviewing the material, if anyone.
The current controversy comes after a November tweet from Musk about selling Tesla stock. Musk tweeted a poll asking the public if he should sell 10% of his Tesla stock, adding that he would abide by whatever the results of the poll were. Following the poll’s results, Musk has sold 12.9 million shares, which is still over 4 million shares short of 10%.
As of December 18th, Tesla’s stock value has plummeted by 22%. David Wagner says, “Musk remains undeterred and continues to post on Twitter and social media on matters that are material to Tesla and its stockholders, and which ultimately have an impact on Tesla’s stock prices”. The lawsuit seeks access to internal Tesla documents under “broad inspection rights.”