Tesla CEO Elon Musk has been sued for fraud by the US government’s financial watchdog over tweets pertaining to his rapidly-abandoned plans to take the electric car company private.
The Securities and Exchange Commission (SEC) suit claims Musk’s tweets, where he told followers he had secured funding at an agreed-upon value to bring the pioneering firm under private ownership, were false and had caused ‘significant confusion and disruption’ in the market.
The filing seeks to ban Elon Musk from being able to hold an officer or director position at any publicly-traded companies. Musk may also be subject to paying financial damages, should the court rule against the Tesla CEO (via Bloomberg).
In an original tweet, Musk said the private funding had been valued at $420 per share, which caused Tesla shares to jump 11%. However, the SEC filing claims that statement of valuation did not have ‘adequate basis in fact.’
“In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” prosecutors write in the complaint. They Musk’s “funding secured” tweet was “false and misleading.”
The filing added: “Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a “special purpose fund,” and had not confirmed support of Tesla’s investors for a potential going- private transaction.”
Tesla shares fell 4% on news of the SECs filing, which could have widespread ramifications for the future of both Musk and Tesla, both of whom are yet to comment on the lawsuit.
Within the text of the lawsuit, the SEC says: “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. By engaging in the conduct alleged in this complaint, Musk violated, and unless restrained and enjoined will violate again, Section 10(b) of the Securities Exchange Act of 1934 (‘Exchange Act’)… and Rule 10b-5 [17 C.F.R. § 240.10b-5] thereunder.”
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