SEC sues Musk over tweets, asking court to force him out of Tesla
The Securities and Exchange Commission sued Elon Musk on Thursday, alleging that the Tesla chief executive’s tweets about taking the electric-car company private at $420 a share were “false and misleading” — and asking the court to, in effect, force him out of Tesla’s leadership.
In its complaint, filed in federal court in Manhattan, the SEC asks the court to prohibit Musk “from acting as an officer or director” of a publicly traded company. It also asks the court to force Musk to pay back “any ill-gotten gains” received as the result of his slew of Aug. 7 tweets.
“Musk’s statements” — including the assertion that he had “funding secured” to take Tesla private — “were premised on a long series of baseless assumptions and were contrary to facts that Musk knew,” the suit alleges.
The Tesla CEO and chairman rejected that idea. “This unjustified action by the SEC leaves me deeply saddened and disappointed,” Musk said in a statement. “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.”
Read the lawsuit: SEC complaint against Elon Musk »
The SEC lawsuit alleges that Musk’s “false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.”
Tesla’s stock opened Aug. 7 at $343.83 a share and soared nearly 13 percent after Musk’s go-private tweet, then settled down, closing that day at $379.57 with a gain of 11 percent.
The stock fell as it became clear that Musk did not have a deal to finance taking Tesla private. No committed investors were ever identified.
The shares slid to $280.45 by Sept. 6 before rising again, some analysts say, in anticipation of possible profits and positive cash flow in the third quarter.
Tesla faces several lawsuits from investors who say they lost money because of the price rise and fall caused by Musk’s tweets. According to Bloomberg, even before Musk’s tweets, the SEC was investigating issues at Tesla, including its car sales projections. The Justice Department is also looking into whether Musk misled investors.
The SEC suit was filed Thursday after the close of markets, when Tesla shares dropped $2.06, or 0.7 percent, to $307.52. They dived nearly 12 percent in after-hours trading to about $271.
In a news conference Thursday, Stephanie Avakian, co-director of the SEC enforcement division, said that as chairman and CEO of a public company, Musk must be “scrupulous with the truth” and that his celebrity does not exempt him from federal securities law.
This is a bad look for Musk and doesn’t bode well for Tesla, said Karl Brauer, a market analyst with Kelley Blue Book.
“Elon Musk and Tesla have a history of skirting traditional operational standards and spinning negative press. But there’s no spinning this one,” Brauer said. “An SEC lawsuit seeking to bar Musk from running Tesla, or any public company, is bad news on a personal and corporate level.”
The suit came as a disappointment to Ross Gerber, CEO of the Gerber Kawasaki wealth management firm in Santa Monica, who has long invested in Tesla and been gung-ho about the automaker’s prospects.