Elon Musk SEC Lawsuit Stems From Misleading Tweets To Take Tesla Private

The Securities and Exchange Commission has filed a lawsuit against Tesla CEO Elon Musk for a series of posts on Twitter where he suggested taking his company private at a stock price of $420 per share.

Court documents filed on Thursday show that SEC charged Musk for securities fraud due to misleading tweets. According to CNBC, sources close to the company also expect Tesla to be sued albeit the company was not named as defendant in the complaint.

The complaint alleges that Musk issued false and misleading statements that funding was secured for a Tesla buyout.

The statements were posted on Twitter in August. Less than three weeks after the controversial tweet, Tesla announced it will remain pubic.

“Musk’s statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price,” the filing from the Southern District of New York reads.

SEC said that Musk’s tweets caused significant disruption, and now seeks civil penalties sans noting an amount. It also wants to bar the billionaire from serving as an officer or director of any public company.

“Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders,” Steven Peikin, co-Director of the SEC’s Enforcement Division, said in a press release.

During a press conference held on Thursday evening regarding the complaint, Stephanie Avakian, co-director of the SEC’s division of enforcement, enumerated the responsibilities that Musk should have as chairman and CEO of a public company.

“Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public,” Avakian said.

In response to the SEC complaint, Musk said that the allegations are unjustified. He also said that he has always taken actions in the best interest of investors, truth and transparency. Amid issues of making misleading statements, Musk said that he never compromised his integrity.

In a statement released on Thursday evening, Tesla and the company’s board showed support to their CEO. The statement attributes Elon’s integrity and leadership for transforming Tesla into the most successful auto company in the United States in over a century.

Tesla shares dropped more than 13 percent in extended trading on Thursday following news of the lawsuit. The stock is around 30 percent below its 52-week high of $387.46.