Elon Musk, Tesla face lawsuit for allegedly violating SEC deal
Elon Musk faces again legal problem for his tweets. Both Bloomberg and TechCrunch report that investor Chase Gharrity sued Musk and Tesla for allegedly violating the terms of an SEC agreement governing CEO tweets. Musk continues to send unapproved “erratic” tweets that open up billions of dollars in potential losses and penalties for the company, Gharrity said. The investor also claimed that Tesla had not obtained a general counsel who could offer “Musk-free” advice.
The most notable example was that of May 1, 2020 Tweeter in which Musk claimed Tesla’s stock price was “too high in my opinion”. This post caused Tesla’s stock to drop 12% in just 30 minutes, and Musk would go on to say that this was neither a joke nor a projection in advance.
Musk’s first tweet-related SEC confrontation was in August 2018, when he spoke Tesla goes private. He reached a settlement with the SEC later that year, to wrestle with the regulator again in 2019 on the production claims of electric vehicles. An amended April 2019 deal requires Musk to get pre-approval from a securities attorney before tweeting anything about key events and financial data.
Tesla has not commented on the lawsuit and is said to have disbanded his public relations team.
There is no guarantee that the lawsuit will go ahead. If so, it could have important ramifications for Musk and Tesla. While the court cannot impose regulatory consequences like the SEC, it could impose sanctions and otherwise pressure Tesla to curb Musk’s Twitter habits.