{"id":274077,"date":"2018-09-28T07:16:44","date_gmt":"2018-09-28T05:16:44","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=274077"},"modified":"2018-09-28T07:22:33","modified_gmt":"2018-09-28T05:22:33","slug":"sec-sues-musk-over-explosive-tweet-about-taking-tesla-private","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/motoring\/274077\/sec-sues-musk-over-explosive-tweet-about-taking-tesla-private\/","title":{"rendered":"SEC sues Musk over explosive tweet about taking Tesla private"},"content":{"rendered":"
\n
\n

Elon Musk is in jeopardy of losing control over the electric-car company he founded, with the Securities and Exchange Commission suing the billionaire for his explosive August tweet about taking Tesla Inc private.<\/p>\n

Moving with unusual speed, the SEC said in a lawsuit filed in New York that Musk misled investors by claiming falsely that he had lined up funding for the transaction.<\/p>\n

The SEC said it\u2019s seeking unspecified monetary penalties and, more importantly, will request that a judge bar Musk from serving as an officer or director of a public company.<\/p>\n

For investors already worried about the company\u2019s ability to produce cars fast enough to start generating profits, the prospect of losing Musk – a billionaire and serial entrepreneur whose name is synonymous with Tesla – was unnerving.<\/p>\n

They dumped the stock, driving it down 13% in after-market trading to below $270 and deepening a selloff that began as the go-private gambit quickly unraveled in August.<\/p>\n

\u201cMusk\u2019s statements were false and misleading,\u201d Stephanie Avakian, co-director of the SEC\u2019s enforcement division, said at a press conference in Washington. \u201cThey lacked any basis in fact.\u201d<\/p>\n

In the lawsuit and at the news conference, the SEC officers went to great lengths to spell out the Tesla CEO\u2019s carelessness and his erratic behavior – from threatening to \u201cburn\u201d short-sellers who targeted Tesla stock to seeking to amuse his girlfriend, the pop singer Grimes, by weaving in a \u201cmarijuana culture\u201d reference to his go-private bid. (He set a buyout price of $420, a number he landed on in part because it\u2019s code for marijuana consumption.)<\/p>\n

Musk called the lawsuit \u201cunjustified\u201d and said it left him \u201cdeeply saddened and disappointed.\u201d<\/p>\n

\u201cI have always taken action in the best interests of truth, transparency and investors,\u201d he said in a statement. \u201cIntegrity is the most important value in my life and the facts will show I never compromised this in any way.\u201d<\/p>\n

In a statement released late Thursday, Tesla and the Palo Alto, California-based company\u2019s board said they are fully confident in Musk, his integrity and leadership. Tesla wasn\u2019t named in the SEC suit.<\/p>\n

The SEC had crafted a settlement with Musk that it was preparing to file Thursday morning, the Wall Street Journal reported, citing unidentified people familiar with the matter. Musk\u2019s lawyers called SEC lawyers to say they were no longer interested in proceeding with the agreement, it said.<\/p>\n

The controversy began when Musk shot off a tweet on Aug. 7 saying he was considering taking the company private and had secured funding for a deal. Tesla shares soared immediately afterward. \u201cIn truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,\u201d the SEC said in the complaint.<\/p>\n

Even before the go-private tweet, the SEC was investigating issues at Tesla including its car sales projections. In addition to the SEC suit, the Justice Department is also looking into whether Musk misled investors, Bloomberg News has reported.<\/p>\n

Timeline<\/h3>\n

On July 31, the SEC said in its complaint, Musk met with three members of a \u201csovereign wealth fund\u201d at Tesla\u2019s factory in Fremont, California, for approximately 30 to 45 minutes. In that meeting, a member of the fund expressed interest in taking Tesla private. Musk took that to mean he was proposing a \u201cstandard\u201d going-private transaction, but the terms were not discussed.<\/p>\n

Musk has previously said he was talking to Saudi investors about a plan to take the company private.<\/p>\n

On Aug. 2, Musk sent an email to the company\u2019s board of directors, chief financial officer and general counsel with a subject line of \u201cOffer to Take Tesla Private at $420.\u201d In the email, Musk explained he wanted to sidestep the \u201cconstant defamatory attacks by the short-selling community, resulting in great harm to our valuable brand.\u201d<\/p>\n

On Aug. 6, Musk discussed a potential takeover with an unnamed private equity executive who has experience with such transactions. That executive told Musk that such a deal was \u201cunprecedented\u201d in his experience.<\/p>\n

The next day, Musk tweeted from his mobile phone: \u201cAm considering taking Tesla private at $420. Funding secured.\u201d Shares rose 11 percent and trading volume spiked. About 12 minutes later, Tesla\u2019s head of investor relations sent a text to Musk\u2019s chief of staff asking, \u201cWas this text legit?\u201d<\/p>\n

\u2018Rationale and Structure\u2019<\/h3>\n

About 20 minutes later, the company\u2019s chief financial officer texted Musk: \u201cElon, am sure you have thought about a broader communication on your rationale and structure to employees and potential investors. Would it help if [Tesla\u2019s head of communications], [Tesla\u2019s General Counsel], and I draft a blog post or employee email for you?\u201d<\/p>\n

Musk responded, \u201cYeah, that would be great.\u201d<\/p>\n

Tesla\u2019s chief financial officer then replied, \u201cWorking on it. Will send you shortly.\u201d<\/p>\n

Musk didn\u2019t clarify his statement until an Aug. 13 blog post in which he tried to walk back the tweet. On Aug. 24., the company announced that it would not be pursuing a buyout.<\/p>\n

\u201cMusk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day,\u201d the SEC said. \u201cHe did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required.\u201d<\/p>\n

“Musk\u2019s false and misleading statements and omissions caused significant confusion and disruption in the market for Tesla\u2019s stock and resulting harm to investors,” the SEC went on to say.<\/p>\n

Elon Musk @elonmusk Am considering taking Tesla private at $420. Funding secured.<\/em>Sent via Twitter for iPhone.<\/em><\/p>\n

While the filing of the lawsuit wasn\u2019t necessarily surprising, the speed with which it was pulled together shocked many long-time watchers of the SEC, an agency known for being much more deliberate in its actions. Steve Peikin, the SEC\u2019s other co-enforcement director, said the agency felt that the impact would be greatest if the case was brought soon after the alleged misconduct.<\/p>\n

\u201cWe conducted a swift investigation here,\u201d Peikin said at the news conference. \u201cThe investigation was complete and it was time to make a charging decision and we made one.”<\/p>\n

The request to bar Musk from serving as a corporate officer – which would apply to all publicly traded companies – could force him to try to reach a settlement quickly. Otherwise, he risks leaving investors wondering about the fate of a company whose image has become intertwined with that of its maverick CEO.<\/p>\n

\u201cIt\u2019s unusual for a case of this significance to move this quickly, in particular when you\u2019ve got a high-profile individual,\u201d said Robert Long, a former SEC enforcement attorney now in private practice at Bell Nunnally in Dallas.<\/p>\n

Still, because the investigation was narrowly focused on several tweets, he said the agency \u201ccould have conducted its investigation quickly.\u201d<\/p>\n

\"\"<\/a><\/p>\n

\n

Read: Musk tweet draws Tesla investor lawsuits over share price jum<\/a>p<\/strong><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Elon Musk is in jeopardy of losing control over the electric-car company he founded, with the Securities and Exchange Commission suing the billionaire for his explosive August tweet about taking Tesla Inc private.<\/p>\n","protected":false},"author":59,"featured_media":189890,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11119],"tags":[26,6118],"class_list":["post-274077","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-motoring","tag-headline","tag-tesla"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/274077","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=274077"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/274077\/revisions"}],"predecessor-version":[{"id":274087,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/274077\/revisions\/274087"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/189890"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=274077"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=274077"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=274077"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}