- A Tesla investor is suing the company board and Musk.
- The company sends continuous “erratic tweets” that violate a settlement with the U.S. Securities and Exchange Commission.
- Musk and Tesla settled with the SEC.
A Tesla investor is suing the company board and Musk for continuing to send “erratic tweets” that violate a settlement with the U.S. Securities and Exchange Commission that requires oversight of his social media activities. The lawsuit, which was first reported by Bloomberg, claims Musk is exposing the company to potential fines and penalties from regulators and could drive down its share price.
The lawsuit was originally filed on March 8. Tesla did not respond to a request for comment. Tesla, Musk, and the SEC reached an agreement in April 2019 that gave the CEO freedom to use Twitter — within certain limitations — without fear of being held in contempt for violating an earlier court order.
An Agreement between Musk and the SEC.
The agreement allows Musk to tweet as he wishes except when it’s about certain events or financial milestones. In those cases, Musk must seek pre-approval from a securities lawyer, according to the agreement filed with Manhattan federal court. The April 2019 agreement was the product of a years-long fight between Musk and the SEC that began after his infamous August 7, 2018 tweet in which he stated the company had “funding secured” for a private takeover at $420 per share. The SEC filed a complaint alleging that Musk had committed securities fraud.
The lawsuit reveals that and it alleges that the Tesla board fails to secure a general counsel.
Musk and Tesla settled with the SEC without admitting wrongdoing. Tesla agreed to pay a $20 million fine; Musk had to agree to step down as Tesla chairman for a period of at least three years; the company had to appoint two independent directors to the board.
The lawsuit revealed Friday alleges that the Tesla board has also failed to secure a general counsel “who can provide advice untainted by Musk,” the lawsuit. Three general counsels departed from the company in 2019. The lawsuit points to as evidence that none were able to exercise independent advice that differed from Musk’s “desired outcome.”
Musk’s “erratic” actions have caused the company “substantial damage,” including billions of dollars in lost market capitalization, the lawsuit says.