Elon Musk's Tesla Tweet May Have Been Illegal

Sources say SEC is investigating claim that funding secured for Tesla move
By Rob Quinn,  Newser Staff
Posted Aug 9, 2018 2:16 AM CDT
SpaceX and Tesla CEO Elon Musk speaks at a news conference in Cape Canaveral, Fla. earlier this year.   (AP Photo/John Raoux, File)
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(Newser) – Elon Musk's tweet about potentially taking Tesla private was definitely unorthodox—and it may also have been illegal, according to analysts and regulators. Sources tell the Wall Street Journal that the Securities and Exchange Commission wants to know more about Musk's tweet, specifically the part about funding being secured, and would like him to explain why no regulatory filing was made. If it turns out that Musk, who said in follow-up tweets that a shareholder vote is the only hurdle before he can take the company private at $420 a share, made a misleading or false statement about funding being secured, he may have committed securities fraud, analysts says.

It's illegal for a director of a public company "to knowingly or recklessly make material misstatements about that company," Harvard Law School professor John Coates tell the New York Times, adding that Musk's tweets "seem cryptic at best, and it is hard to see how he has complied with his duty to not be misleadingly incomplete." Tesla's share price, which had been at around $340, jumped 10% in the hours after Musk's surprise announcement Tuesday. Coates, who notes that it is far from clear how Musk arrived at the $420 price, predicts that the CEO will face many lawsuits from short-sellers and others who lost money when the stock price jumped. (The board says it has been discussing Musk's proposal over the last week.)

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