Musk Could Be Facing SEC Investigation Over His Tesla Tweets

Elon Musk - Tesla

In another chapter in the ongoing saga around Tesla (NASDAQ:TSLA) and its outspoken founder, the U.S. Securities and Exchange Commission (SEC) said it was investigating Tesla CEO Elon Musk over a Twitter (TWTR:NYSE) poll in which he let his 79 million followers decide whether he should dump 10% of his Tesla stock.

Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?,’ read the text of the tweet by Musk, who said he would “abide by the results of this poll, whichever way it goes.”

Musk’s stock selling proposal, which on November 6 was worth more than $20 billion, led to a 16% TSLA drop over the course of the two days of Nasdaq trading that followed the tweet.

Meanwhile, details of the investigation over Musk’s Twitter poll came to light on Tuesday, March 19, after the SEC, which believes to have the legal authority to take everyone’s favorite billionaire to court over his past Twitter habits, rejected a motion from a Musk attorney asking a Manhattan federal judge to nullify a 2018 agreement that required a designated person to review all Musk tweets that would be material to investors and the company.

Not the first time

This is not the first time that Musk has had a run-in with the SEC.

In February 2019, the agency asked a federal judge to hold Musk in contempt for tweeting “Tesla…will make around 500k in 2019.” That contradicted the company’s official guidance that it would deliver between 360K and 400K total electric vehicles in 2019.

Musk later corrected himself, tweeting he was referring to the production run rate. The SEC however, said the Tesla CEO was in “blatant violation” of the settlement it reached with the watchdog in 2019.

Musk disagreed, arguing there was “no basis to issue contempt sanctions” against him. He also noted that the SEC was trying to make an “unconstitutional power grab.”

2018 was another Musk-SEC tweet spat year.

On Aug. 7, 2018, Musk sent a tweet suggesting that he was considering taking the electric car company private at $420 per share.

Am considering taking Tesla private at $420. Funding secured,” the Tesla and SpaceX CEO tweeted that day.

The SEC reacted to the tweet, filing a lawsuit against the billionaire for securities fraud. The SEC argued that the tweet was misleading, as it implied that Musk had already secured funding for the deal. Musk defended the tweet and its premise, saying that Saudi Arabia’s sovereign wealth fund had agreed to support him in taking Tesla private.

TSLA saw its price surge 11% to $379 after the tweet, momentarily increasing Musk’s personal fortune. Ticker however, lost more than 9 points the following day, showing market skepticism on the feasibility of Musk’s $420 buyout plan.

Fast forward to 2022, Elon Musk is in a courtroom battle with company shareholders who allege that his 2018 tweet cost them billions of dollars in losses.

Musk himself – one of the wealthiest men in the world – also lost some money because of the now infamous tweet. In 2019 he agreed to settle with the SEC paying $20 million while Tesla kicked in another $20 million in fines. He also agreed to step down as Tesla chairman for three years and was required to have his company put in place additional controls and procedures as a way to oversee his statements about the company on Twitter and elsewhere. While Musk couldn’t claim innocence for the charges, the settlement allowed him to avoid being found guilty.

However, Musk has continued to target the SEC with his most recent allegation, saying in late February that the agency is trying “to chill his exercise of First Amendment rights” in an “unrelenting investigation” of him and the company he founded.

To say Musk’s SEC saga continues it’d be an understatement. But for those wondering whether the long-storied animosity between the Tesla CEO and the regulatory body will ever end, the following Musk tweet says it all.

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