On Thursday, the CEO of Tesla, Elon Musk, faced a lawsuit by the Securities and Exchange Commission for making “false and misleading” statements to investors, allegations he immediately dismissed.
The SEC is seeking to prevent Musk from serving as an officer or a director of a public company. The lawsuit was prompted by an August 7 tweet in which Musk wrote, “Am considering taking Tesla private at $420. Funding secured.”
According to the commission, the Tesla CEO hadn’t secured the funding. “In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” the SEC said in its complaint.
It added that the tweet, as well as several others from that day, led to “significant confusion and disruption in the market for Tesla’s stock” which quickly shot up almost 9 percent, only to decline sharply soon afterwards. The tweets also caused harm to investors, the SEC maintains, although Musk claimed he had investors’ best interest at heart.
The SEC further alleges that Musk sent the tweet without previously consulting any board members, employees or outside advisers. “This is serious. This is what you go after insider traders and market manipulators on. This is a serious allegation,” said Charles Whitehead, a professor at Cornell Law School.
Musk, on his part, called the allegation disappointing, saying it left him “deeply saddened.”
“I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
After trading hours Thursday, Tesla’s stock dropped over 12%, as low as $270. Including the after-hours plunge, Tesla’s stock has plummeted more than 29% since Musk’s infamous tweet.
However, the company’s board of directors said in a joint statement that they are “fully confident in Elon, his integrity, and his leadership of the company.”