The Industry

SEC Sues Elon Musk for Tweets About Taking Tesla Private, Seeks to Remove Him as CEO

The SEC claims that Musk “knew or was reckless in not knowing” that his tweets were inaccurate.
The SEC claims that Musk “knew or was reckless in not knowing” that his tweets were inaccurate.
DAVID MCNEW/AFP/Getty Images

The Securities and Exchange Commission filed a complaint against Tesla CEO Elon Musk in a Manhattan federal court on Thursday accusing him of misleading investors when he tweeted that he had secured funding to take the company private at $420 per share. The company’s stock rose by as much as 7.3 percent after Musk sent the tweet in August. Musk later claimed that Saudi Arabia’s sovereign wealth fund had approached him about striking a deal, but Tesla then disclosed that it did not in fact have sufficient funding. Musk wrote in a blog post later that month that he decided to keep Tesla public.

The SEC complaint characterizes Musk’s tweet and his later claims about speaking with funding sources as falsehoods. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the complaint reads. It also alleges that Musk “knew or was reckless in not knowing” that his tweets were inaccurate.

The SEC is requesting that the court prohibit Musk from acting as an officer or director of a public company, along with unspecified monetary penalties. Tesla itself has not been sued, though the company’s stock fell by 10 percent after news of the suit broke.

Tesla issued a statement on behalf of Musk:

This unjustified action by the S.E.C. 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 was already investigating Tesla before Musk sent the tweet. The commission subsequently subpoenaed and interviewed Tesla employees, board members, and financial institutions that it had hired to explore the possibility of taking the company private.