SEC Sues Elon Musk After “Misleading” Tweets
Elon Musk has been sued by the Securities and Exchange Commission (SEC) for fraud after the former alleged on twitter that he was selling the company to a private company. ]
The could lead to Musk being banned from leading any public company, or fined.
Tesla’s shares have fallen over 4% since the announcement that SEC and the justice department have been investigating Tesla and Musk.
In August, Musk tweeted that he had secured private funding for Tesla and was preparing on taking the company private.
After the tweets, Tesla shares went up 11%, until it dawned on most that Musk had exaggerated and what took place were only preliminary talks and that funding had not been secured.
The SEC said: “This statement was false and misleading. Over the next three hours, Musk made a series of additional materially false and misleading statements via Twitter.”
“Musk’s false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors. By engaging in the conduct alleged in this complaint, Musk violated, and unless restrained and enjoined will violate again, Section 10(b) of the Securities Exchange Act of 1934 (‘Exchange Act’)… and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.”
But it isn’t only SEC that is suing the company. Investors who were also betting on the collapse of Tesla shares have also taken the embattled owner to court.
Musk explained that he thought the Saudi Arabia’s sovereign wealth was prepared to fund the company at a proposed price of $420 per share. According to him, he said he calculated the $420 share price based on a 20% premium over the day’s closing share price. He then said he rounded the number up because he had just learned about the number’s significance in marijuana culture, and thought his girlfriend would like it.
In a statement, Elon Musk said: “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.”
The SEC as the US’s top financial watchdog has the power to bring civil actions against any company or its directors and could fine the company.