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U.S. financial regulator sues Elon Musk

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U.S. financial regulator sues Elon Musk



The U.S. Securities and Exchange Commission has alleged that Musk’s tweets were false and misleading, and is pushing to have him barred from serving on the board of Tesla or any other public company.

From the pv magazine USA website

When Elon Musk’s August 7 tweet about taking the company private at $420 per share hit the internet, reactions ranged from those who considered this a justified reaction to short sellers to others who saw it as the irresponsible behavior of an unhinged and delusional executive.

But for the U.S. Securities and Exchange Commission (SEC), this tweet was something else: illegal.

The agency created in the wake of stock market failures which led to the Great Depression declared in a lawsuit filed yesterday that Elon Musk’s tweets, particularly his claim that funding was secured, were false and misleading, and caused “significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors”.

SEC in particular has stated that there was no commitment by Saudi Arabia’s sovereign wealth fund to purchase Tesla, only preliminary talks, and that as such the statement that “funding was secured” was not accurate. The agency describes Musk’s behavior as “reckless”.

SEC is not playing around in this lawsuit; in addition to penalties and repayment of any “ill-gotten gains” that Musk may have enjoyed from the temporary stock surge in the wake of the tweet, the agency is asking the court to bar Musk from serving on the board or as a director of Tesla or any company that issues stock, in order to prevent him from doing anything like this again.

One interesting wrinkle of this case is that despite public criticisms of the practice of issuing statements about securities-related matters on Twitter, SEC made no criticism of using the social media outlet to release this information; noting that Tesla had informed investors in 2013 that it would be releasing information via Twitter and that such tweets were “publicly available to anyone with internet access”.

While this would not include anyone blocked by Musk, this does not appear to be a sticking point for SEC.

And while both Tesla’s and Musk’s Twitter accounts have been silent since the lawsuit was filed, the company’s board has stated that it stands behind the its eccentric chairman and CEO.

The SEC lawsuit is itself having its own impacts, and Tesla’s shares crashed 12% in after-hours trading to $271 as of 8 PM yesterday.

On Bloomberg Columbia law professor John Coffee has called this an “open and shut case” where SEC is pretty much ensured of victory, and states that Tesla’s board should push Musk to settle.



Source PV Magazine

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