Skip to main content

SEC sues Tesla CEO Elon Musk for securities fraud, Musk calls suit unjustified

Tesla CEO Elon Musk’s tweeting about taking the company private, with “funding secured,” took investors and the company by surprise. On Thursday, September 27, the Securities and Exchange Commission (SEC) filed suit against Musk, charging him with securities fraud, according to court documents.

The SEC alleges that Musk made “false and misleading” statements on Twitter when he stated, “Am considering taking Tesla private at $400. Funding secured.”

Musk followed up the original tweet, saying “Shareholders could either to sell at 420 or hold shares & go private.”

Shareholders could either to sell at 420 or hold shares & go private

— Elon Musk (@elonmusk) August 7, 2018

The SEC also alleged Musk did not properly inform securities regulators of what were considered material events.

Musk stated later in the month that when he proposed the $420 per share price, he was confident the funding he referred to would materialize at that price after prior discussions with Saudi Arabia’s Public Invest Fund, according to CNBC.

The SEC’s complaint alleged:

Musk knew that he (1) had not agreed upon any terms for a going-private transaction with the Fund or any other funding source; (2) had no further substantive communications with representatives of the Fund beyond their 30 to 45 minute meeting on July 31; (3) had never discussed a going-private transaction at a share price of $420 with any potential funding source; (4) had not contacted any additional potential strategic investors to assess their interest in participating in a going-private transaction; (5) had not contacted existing Tesla shareholders to assess their interest in remaining invested in Tesla as a private company; (6) had not formally retained any legal or financial advisors to assist with a going-private transaction; (7) had not determined whether retail investors could remain invested in Tesla as a private company; (8) had not determined whether there were restrictions on illiquid holdings by Tesla’s institutional investors; and (9) had not determined what regulatory approvals would be required or whether they could be satisfied.

Other Tesla executives, including the Tesla head of Investor Relations, were not informed about Musk’s plan to take the company private or make a statement to that effect.

Tesla was not named in the SEC lawsuit, although CNBC reported that sources close to Tesla told the news outlet that the company expected to be sued. Musk told the news outlet he doesn’t agree with the lawsuit.

“This unjustified action by the SEC leaves me deeply saddened and disappointed. 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,” he said in a statement.

If Musk is found guilty of the fraud charges, the SEC wants to bar him from serving any publicly traded company as an officer or director, CNBC reports.

Updated on September 27, 2018: Added Musk’s statement.

Editors' Recommendations

Bruce Brown
Digital Trends Contributing Editor Bruce Brown is a member of the Smart Homes and Commerce teams. Bruce uses smart devices…
Elon Musk issues stark ultimatum to Tesla workers
Elon Musk stands looking to his right.

Tesla chief Elon Musk has told his workers to return to the office or leave the company, according to a memo sent to staff this week.

Some Tesla office employees have been working at home during the pandemic, but Musk now wants them to get out of the house and restart the commute.

Read more
Elon Musk eyes 2024 for Tesla robotaxi sans steering wheel, pedals
Elon Musk - Tesla CEO

Tesla is aiming to mass produce a robotaxi by 2024, CEO Elon Musk revealed during an earnings call with investors on Wednesday as the company reported better-than-expected quarterly figures.

The dedicated robotaxi will feature a “futuristic” design and come without a steering wheel or pedals, Musk said, adding that the vehicle, which would build on the automaker’s current self-driving technology, could be “a massive driver of Tesla’s growth.”

Read more
Elon Musk hit with lawsuit over controversial Twitter stake
Elon Musk.

Elon Musk looks to be in hot water over his recent purchase of Twitter stock.

A lawsuit brought by a fellow Twitter investor accuses the billionaire entrepreneur of costing shareholders money while Musk himself saved around $143 million.

Read more