SEC investigates Tesla following Musk’s problematic Tweets

After Tesla Inc. CEO Elon Musk proposed selling 10% of his Tesla equity in a poll on Twitter, and causing the company's share price to plummet, the U.S. Securities and Exchange Commission subpoenaed the company, beginning an investigation. The investigation was triggered because that tweet may have violated a 2018 settlement agreement Tesla entered into with the SEC. This 2018 settlement agreement resolved a prior SEC investigation into Musk’s Twitter activity.

In August 2018, Musk published a tweet claiming to have secured enough investors and funding to take Tesla private at an increased $420 per share, which then boosted Tesla’s stock price 6% that day, to close at $379.57. However, a few weeks later Musk announced that Tesla would remain a public company. Following that announcement its shares fell 15%. The SEC’s subsequent September 2018 suits alleged that, amongst other things, Musk had never actually secured funding and that Tesla’s board had not even been shown a formal proposal of such a deal, making his tweets misleading as they hinted that the deal was close to finalized. The suits were quickly settled, and conditions of the settlement included Musk stepping down as chairman and Tesla agreeing to appoint two new independent directors to its board and a securities attorney to oversee its senior officers' social media communications.

According to the company's most recent 10-K filed on February 4, 2022, Tesla received a subpoena from the agency on November 16, 2021, seeking information about compliance with the settlement, which required Musk to obtain preapproval from Tesla’s in-house counsel for tweets before publishing them online.

However, this is not the first time since 2018 that the SEC has come after Musk for his Twitter use. In early 2019, the SEC accused him of tweeting about production estimates in ways that violated the terms of their agreement. The settlement was revised to include more specific language following this dispute and no additional action was taken by the agency at the time.

The SEC’s most recent investigation remains ongoing. 

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About Cristina M. Paneque

Cristina Paneque's practice is focused on securities litigation. She is an associate in the firm's New York office.

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