SEC suit targets Tesla’s top exec
Tweet by Musk draws complaint
The Securities and Exchange Commission filed a lawsuit Thursday against Elon Musk, the chief executive of Tesla, accusing him of making false public statements with the potential to hurt investors.
The lawsuit, filed in federal court in New York, seeks to bar Musk from serving as an executive or director of publicly traded companies. Tesla, the electric-car maker of which Musk was a co-founder, is publicly traded.
The suit relates to an Aug. 7 Twitter post by Musk, in which he said he had “funding secured” to convert Tesla into a private company.
The SEC said Musk “knew or was reckless in not knowing” that his statements were false or misleading. “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 its lawsuit.
Tesla didn’t immediately respond to requests for comment. Roel Campos, a lawyer for Musk and a former SEC commissioner, did not respond to a request for comment.
Musk, who sometimes sleeps on Tesla’s factory floor as he works to iron out production problems, is widely regarded by analysts and investors as the creative engine behind Tesla. The company’s shares tumbled more than 10 percent in after-hours trading after the filing of the SEC lawsuit.
The SEC already had been investigating Tesla when Musk posted his going-private tweet while he was driving himself to the airport in a Tesla Model S. The company’s shares immediately rocketed higher.
It soon emerged that Tesla’s board members were blindsided by Musk’s Twitter post. Tesla at the time hadn’t hired investment banks or others to help raise the money
that would be needed to take Tesla private. And many Tesla investors — natural places for Musk to seek financing — said they hadn’t heard anything from Musk before his tweet.
The SEC soon issued a round of subpoenas to Tesla and the financial institutions it eventually hired for advice on a potential conversion into a private company. The agency also interviewed a number of Tesla board members, according to a person familiar with the matter.
The complaint said Musk “knew that he had never discussed a going-private transaction at $420 per share with any potential funding source.”
The SEC said Musk had been in a persistent feud with investors who were betting that Tesla shares would fall.
The complaint notes that
Musk had discussions in late July with a foreign investment fund that had recently acquired a 5 percent stake in Tesla.
In those discussions, Musk said he was thinking about taking Tesla private, but regulators said nothing formal was agreed on.
The lawsuit is the latest in a series of escalating problems for Tesla and Musk.
The company has been struggling to achieve the ambitious production targets that Musk had publicly outlined.
He has made a series of unusual public comments or appearances, including an Internet interview in which Musk appeared to smoke marijuana.
Federal prosecutors in California also have sought information from Tesla, an inquiry that appears to be at an early stage.