Tesla investor is suing Elon Musk, his “unpredictable” tweets violate the SEC agreement

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Elon Musk, Tesla’s chief executive, has been sued by a shareholder who accused him of violating his 2018 settlement with the US Securities and Exchange Commission for using Twitter.

Shareholders have Musk’s “erratic” tweets and Tesla directors’ failure to ensure compliance with the SEC settlement, according to an unsealed complaint in Delaware Chancery Court late Thursday that also cited the electric car company’s board of directors Billions of dollars exposed to losses.

The complaint highlighted several Musk posts on the social media platform Twitter, including its May 1 assessment that Tesla’s stock price was “too high”, causing Tesla’s market value to fall by more than 13 billion US dollar led.

Chase Gharrity, the plaintiff, said Musk’s actions and directors’ inaction caused “significant financial damage” and that they should pay damages to Palo Alto, California-based Tesla for violating their fiduciary duties.

The lawsuit was filed despite the fact that Tesla’s share price has increased nearly five-fold since Musk’s “too high” tweet, giving Tesla a valuation of well over $ 600 billion, and the SEC has not publicly accused Musk of the recent violations.

“It could put pressure on the SEC to use some sort of recourse,” said Charles Elson, a professor at the University of Delaware who specializes in corporate governance.

Tesla did not immediately respond to requests for comment on Friday. Gharrity’s attorneys, Musk’s attorneys on the SEC, and the SEC did not immediately respond to similar inquiries.

The SEC settlement followed Musk’s August 2018 tweet that he had “secured funding” to potentially take Tesla private in a $ 72 billion deal. In reality, Musk wasn’t close.

Musk and Tesla each paid $ 20 million in fines, and Tesla’s attorneys agreed to pre-check some of Musk’s tweets.

The deal was later changed to clarify when pre-testing was required, prompted by an unverified tweet from Musk about Tesla’s vehicle production forecast.

Last year, a federal judge in San Francisco said Tesla and Musk were facing a lawsuit alleging Musk’s private tweet cheated on shareholders. This case is still pending.

The case is Gharrity v Musk et al., Delaware Chancery Court, No. 2021-0199.


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