This article first appeared in El Economista on June 2, 2021.
Last spring, the U.S. Securities and Exchange Commission (SEC) took Tesla and its CEO, Elon Musk, to task for allegedly violating the terms of a settlement agreement reached in 2019, the Wall Street Journal advances.
SEC officials pointed to a May 1, 2020, tweet in which Musk said Tesla’s stock price was “too high,” leading to a more than $13 billion decline in the company’s market value, according to the report. The SEC also pointed to some of Musk’s 2019 tweets, in which he discussed solar roof production figures without obtaining prior approvals.
While securities regulators monitored Musk on Twitter amid the pandemic and complained to both him and Tesla through multiple notices, they did not file a motion to compel enforcement of the agreement initialed between the two parties.
Musk is required to have Tesla-related tweets containing material company information approved by an attorney before posting. Having a legal overseer authorize his use of the social network is part of a revised agreement between the SEC, Musk and Tesla. The terms of it also forced the billionaire to step down from his role as chairman of Tesla’s board of directors.
It should be recalled that SEC regulators originally filed two separate complaints – one against Musk personally and one against Tesla – accusing them of committing securities fraud in 2018, after the CEO tweeted that he would take the company private in exchange for $420 per share and that he had “funding secured” for such a transaction.
The infamous August 7, 2018 tweet sent Tesla’s stock soaring and sparked a period of volatility for the company and Musk. In the 16 months that followed, the electric car maker’s stock hit a three-year low around $177 before rebounding back above $420 in December 2019. This Wednesday, Tesla shares were trading at $601.77.
Other lawsuits against Tesla and Musk filed by some of the company’s shareholders, including Gharrity v Musk et al, also set their sights on the company CEO’s tweets alleging they caused financial harm.