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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 All Your Lawn Are Belong To Us on Saturday September 29 2018, @01:25AM (2 children)
A CEO should carefully parse every word they speak to the public. That's one of the reasons they get the big bucks.
What he ended up doing was causing price manipulation by deception, a form of securities fraud. The SEC were treating him with kid gloves compared to what they'd hit someone else with.
This sig for rent.
(Score: 1) by khallow on Saturday September 29 2018, @02:21AM
Or we can just not pander to fools. Sorry, I don't buy that a few ambiguous tweets constitute securities fraud or should do so. I get that relaxing such rules will result in some increase in fraud and whatnot. Increases in human freedom typically result in some increases in human bad behavior too. But such laws have perversely resulted in reducing the flow of information from CEOs and other business leaders to potential investors and customers.
(Score: 1) by khallow on Saturday September 29 2018, @03:24AM
Also, the problem is that this isn't necessarily a trait of a good CEO. If your industry is accounting or public relations then a shoot-from-the-hip CEO can be very damaging to the company. But there's many industries where key skills are communicating clearly and making decisions fast and decisively. A cautious CEO who is too worried about communication liability can be very harmful in those cases.
My view is that rules like what you allude to result in a lot of harm to the business world, such as encouraging a poisonous atmosphere of non-communication and creating a generation of risk-adverse business leaders.