Thursday, April 15, 2021

Elon Musk, Tesla face lawsuit for allegedly violating SEC deal

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Elon Musk faces again legal problem for his tweets. Both Bloomberg and TechCrunch report that investor Chase Gharrity sued Musk and Tesla for allegedly violating the terms of an SEC agreement governing CEO tweets. Musk continues to send unapproved “erratic” tweets that unlock the company billions of dollars in potential losses and penalties, Gharrity said. The investor also claimed that Tesla had not obtained a general counsel who could offer advice “not contaminated by Musk”.

The most notable example was that of May 1, 2020 Tweeter in which Musk claimed that Tesla’s stock price was “too high in my opinion”. That post caused Tesla’s stock to drop 12% in just 30 minutes, and Musk would go on to say it wasn’t a joke or a screening in advance.

Musk’s first tweet-related SEC confrontation was in August 2018, when he spoke Tesla goes private. He reached a settlement with the SEC later that year, to wrestle with the regulator again in 2019 on the production claims of electric vehicles. An amended April 2019 deal requires Musk to get pre-approval from a securities attorney before tweeting anything about key events and financial data.

Tesla has not commented on the lawsuit and is said to have disbanded his public relations team.

There is no guarantee that the lawsuit will go ahead. If so, it could have important ramifications for Musk and Tesla. While the court can’t impose regulatory consequences like the SEC, it could impose penalties and otherwise pressure Tesla to curb Musk’s Twitter habits.



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