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Elon Musk Accused by SEC of Misleading Investors in August Tweet
Tesla Inc. Chief Executive Officer Elon Musk was accused by the Securities and Exchange Commission of misleading investors when he tweeted that he had funding lined up to take the company private.
The agency said Musk fabricated the claim in his August tweet, which sent Tesla shares higher.
"In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the SEC said in complaint filed Thursday in Manhattan federal court, less than two months after Musk's tweet.
The suit seeks an order from a judge barring Musk from serving as an officer or director of a public company, a request often made in SEC lawsuits, as well as unspecified monetary penalties.
Shares fell about 10 percent in after-hour trading on news of the lawsuit. The company, which wasn't sued, and an attorney for Musk didn't immediately respond to requests for comment. The SEC has scheduled a press conference for 5 p.m.
The complaint: 1:18-cv-8865 (alt source).
Current (delayed) stock quote: TSLA.
Also at the BBC, TechCrunch, Bloomberg, c|net, and Ars Technica.
[Update: added 20180928_141312 UTC]
The CNBC is reporting Tesla's Musk pulled the plug on a settlement with the SEC at the last minute:
Tesla and the Securities and Exchange Commission were very close to a no-guilt settlement Thursday, reported CNBC's Andrew Ross Sorkin on Friday, citing sources. But, these people say Musk pulled out of the agreement at the last minute.
Under the terms of the deal, Musk and Tesla would have had to pay a nominal fine, and he would not have had to admit any guilt. However, the settlement would have barred Musk as chairman for two years and would require Tesla to appoint two new independent directors, reported CNBC's David Faber, citing sources.
Musk reportedly refused to sign the deal because he felt that by settling he would not be truthful to himself, and he wouldn't have been able to live with the idea that he agreed to accept a settlement and any blemish associated with that, the sources said.
Tesla was not immediately available for comment.
Musk said Thursday the SEC's allegations are "unjustified" and that he acted in the best interests of investors.
(Score: 2) by ikanreed on Friday September 28 2018, @03:49PM (7 children)
And it's not like the facts are complicated. He made a tweet stating openly a source of money for investors that didn't exist.
As an aside, Tesla would probably have been fine in the long run if he hadn't brought the Silicon Valley attitude of "growth of less than 100% per year is bad for startup, also everything must be automated" which is pretty much exactly the wrong approach for a luxury car company.
(Score: 2) by bob_super on Friday September 28 2018, @04:55PM (6 children)
> And it's not like the facts are complicated. He made a tweet stating openly a source of money for investors that didn't exist.
The Tweet: "Am considering taking Tesla private at $420. Funding secured."
People keep forgetting the most important word, because of the other two important words.
There is no question that the first sentence is true. The second one is not, but does the second sentence constitute a criminal offense, when the second word of the tweet makes the whole thing a hypothetical ?
(Score: 2) by ikanreed on Friday September 28 2018, @05:59PM (5 children)
No, the critical words are absolutely "funding secured", since, you know, that's the fabrication.
(Score: 2) by bob_super on Friday September 28 2018, @06:05PM (4 children)
"Hey, I talked to Apple because they want to take us private at $420. They have money."
The money part is not the important part.
(Score: 2) by ikanreed on Friday September 28 2018, @06:15PM (3 children)
"The money part is not the important part" is a very strange sentence to say with respect to capital investments. I cannot fathom what mental steps led you to make up a new quote that would also be fraud, and think it explains anything.
(Score: 2) by bob_super on Friday September 28 2018, @06:29PM (2 children)
I'm pointing out that "funding secured" does not mean for The Street what it means for someone who puts "considering" in their announcement.
The street reads "funding secured" as "papers signed, approvals finalized for purchase", while the word "considering", and all his follow-up communications, clearly indicate his strong desire, but not a done deal.
If he had said my second phrase, people would have focused on the intention, instead of jumping on the terminology they are used to, not understanding he didn't mean it as they are used to reading it, and missing the context which was explicit in the first sentence.
He misjudged them, they misread him.
(Score: 2) by ikanreed on Friday September 28 2018, @06:47PM (1 child)
Gonna have to level with you: that's dumb as hell, words mean things.
(Score: 2) by bob_super on Friday September 28 2018, @07:30PM
Yep, that's indeed dumb as hell: words mean different things to people who specialize in different things.
To a big-picture guy who specializes in missing deadlines, "secured" means "I know how to make it happen, eventually". To The Street, it means "locked down and signed"
That confusion of normal meaning vs specialist meaning happens very often with legalese, and recently with NSAspeak ("collect", remember?)
Twitter skips over the line, which would have normally been crossed by a press released triple-checked by Legal and the CFO, who speak Street. A CEO should know better, but that's still what happened.