Elon Musk being sued by SEC for making false and misleading statements

Taking Tesla chief executive Elon Musk to task for his tweeting habit, the U.S. Securities and Exchange Commission filed a lawsuit yesterday that accuses him of making “false and misleading” statements on Twitter about his plans for taking Tesla private.

It may be recalled that in August, Musk tweeted about taking his electric car manufacturer private. 

As per SEC, Musk’s statements violate the 1934 Securities Exchange Act, and that Musk “knew or was reckless in not knowing” that his tweets were not accurate and true.

A complaint filed by the SEC in a federal court in New York said that Musk “falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote.”

In a press conference discussing the lawsuit, Stephanie Avakian, co-director of the SEC’s Enforcement Division, said Musk’s tweets led investors to think it was a “virtual certainty” that Tesla would be taken private at $420 a share. The SEC says that those statements weren’t accurate. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the complaint said. 

Musk, the SEC alleged, “knew or was reckless in not knowing” that his tweets weren’t in fact true.

Meanwhile, the Tesla CEO refrained from tweeting his reply and the company said in a statement,

“This unjustified action by the SEC leaves me deeply saddened and disappointed. 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.”

This added to an earlier statement released by Tesla in which Musk said he was “saddened and disappointed” by the SEC charges.

This action by SEC adds to Tesla’s mounting troubles. Incidentally, Musk is also being sued by a major short seller Andrew Left of Citron Research in a class action lawsuit for his tweets about taking Tesla private.

The SEC is also seeking to bar Musk from serving as an officer or director of any US public company.

Image Credits: Business Insider