Elon Musk sued for securities fraud by SEC over tweets suggesting taking Tesla private
'This unjustified action by the SEC leaves me deeply saddened and disappointed,' says Mr Musk
Your support helps us to tell the story
As your White House correspondent, I ask the tough questions and seek the answers that matter.
Your support enables me to be in the room, pressing for transparency and accountability. Without your contributions, we wouldn't have the resources to challenge those in power.
Your donation makes it possible for us to keep doing this important work, keeping you informed every step of the way to the November election
![Head shot of Andrew Feinberg](https://static.independent.co.uk/static-assets/support-us/andrew-feinberg.png)
Andrew Feinberg
White House Correspondent
The US Securities and Exchange Commission (SEC) has accused Tesla Motors CEO Elon Musk of fraud and is seeking to ban him as an officer of a public company, over a tweet he wrote indicating he planned on taking the company private.
The lawsuit was filed on Thursday in the United States Southern District court in New York, and says that Mr Musk made a “series of false and misleading statements” about his plans to take the company private, according to court documents.
News of the lawsuit saw a 12 per cent drop in Tesla stock price in extended trading.
Mr Musk tweeted in August that he was considering taking Tesla private, and that he had secured funding to do so once the company saw stock prices reach $420 a share.
Since that tweet, Mr Musk has backtracked, and said that he had been discussing funding to take the company private with the Saudi Arabian sovereign wealth fund, and felt he could confidently say he could secure funding at that stock price.
“Musk’s statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote,” the SEC suit says.
“Neither celebrity status nor reputation as a technological innovator provides an exemption from federal securities laws,” Stephanie Avakian, co-director of enforcement at the SEC, told a news conference announcing the
It continues: “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source”.
Mr Musk said he was “saddened” by the action.
“This unjustified action by the SEC leaves me deeply saddened and disappointed,” he said in a statement. “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.”
Bloomberg News reports that the SEC had already been investigating Tesla over several issues including car sales projects, and that the Justice Department is looking into whether Mr Musk misled investors.
“Musk using his mobile phone, published a tweet, ‘Am considering taking Tesla private at $420. Funding secured’,” the SEC complaint reads. ”Musk published this tweet in the middle of the day’s official market trading. Immediately after this tweet, the trading volume and price of Tesla shares spiked”.
Of the $420 price point, the complaint notes that Mr Musk “had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny’”.
According to the complaint, Mr Musk tweeted his statement without consulting other Tesla executives about the potential privatisation. The head of Tesla’s investor relations, even, sent a text to Mr Musk’s chief of staff asking if the message was legitimate, according to the SEC complaint.
Following the initial tweet, Mr Musk doubled down on the potential turn private, and later told The New York Times that he had calculated the take-private price at $420 by rounding up $1 from what would have been a 20 per cent hike from the prices at the time.
The complaint also says that Mr Musk did not properly notify regulators about his plans to take the company private.
Mr Musk called off the take-private plan on 24 August. Tesla had announced that they were being investigated by the Department of Justice on 7 August.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments