Elon Musk has gotten himself into significant legal trouble via Twitter.
The Securities and Exchange Commission filed a lawsuit against Tesla’s CEO on Thursday for allegedly making “false and misleading” statements to investors. The agency is requesting a federal judge to bar Musk from holding any officer or director position in a public company, among other sanctions.
The lawsuit is centered around a tweet Musk published on August 7 regarding the potential privatization of Tesla.
“I am contemplating taking Tesla private at $420,” Musk stated. “Funding secured.”
However, the SEC claimed that he had not actually secured any funding.
“In reality, Musk had not even discussed, let alone confirmed, essential deal terms, including price, with any potential funding source,” the SEC noted in its complaint.
This tweet, along with Musk’s follow-up tweets over the next few hours, led to “significant confusion and disruption in the market for Tesla’s stock,” negatively impacting investors, according to the SEC. On the day Musk tweeted, Tesla’s stock rose nearly 9%, but it has seen a considerable drop since then.
Tesla’s (TSLA) shares fell over 11% during after-hours trading on Thursday.
“This unwarranted action by the SEC truly saddens and disappoints me,” Musk remarked in a statement. “I have always acted with truth, transparency, and investors’ best interests at heart. Integrity is the most vital value in my life, and the facts will demonstrate that I have never compromised this.”
Tesla and its board conveyed in a joint statement that they “are entirely confident in Elon, his integrity, and his leadership of the company.”
“We are focused on maintaining the production ramp for Model 3 and ensuring we meet the needs of our customers, shareholders, and employees,” the statement added.
Stephanie Avakian, co-director of the SEC’s enforcement division, emphasized at a press conference on Thursday that the agency is dedicated to holding individuals accountable, irrespective of “celebrity status or reputation as a technology innovator.”
The complaint alleged that Musk rounded up the proposed buyout price to $420 per share “because he had recently learned about its significance in marijuana culture” and thought it would amuse his girlfriend, the musician Grimes.
According to the SEC, Musk did not consult any board members, employees, or outside advisors prior to sending the tweets.
“This is critical. This is the kind of action taken against insider traders and market manipulators,” stated Charles Whitehead, a law professor at Cornell. “This is a very serious allegation.”
Musk abandoned his plan to take Tesla private less than three weeks after his initial tweet. He later explained that his “funding secured” remark stemmed from discussions with Saudi Arabia’s sovereign wealth fund, which had encouraged him to privatize the company and was willing to increase its investment in Tesla.
The Justice Department is also looking into comments made by Musk, as Tesla revealed last week. The company noted it has received a voluntary request for documents and is cooperating fully while stating that it has not been subpoenaed.
Shareholders have initiated lawsuits alleging that Musk made statements designed to manipulate the stock price.
Musk has found himself in hot water recently due to his unpredictable actions. He has sent out late-night tweets, dismissed analysts during corporate earnings calls, and criticized individuals involved in the rescue of boys trapped in a cave in Thailand, in addition to engaging in conflicts with journalists and investors he perceived as unfair. Musk has even announced plans for a website called Pravda to critique the media.
— Contributions to this report were made by CNNMoney’s Matt Egan and Jackie Wattles.
CNNMoney (New York) First published September 27, 2018: 4:18 PM ET
