On August 7, 2018, then Chairman and CEO, Elon Musk tweeted that Tesla was considering going private and had the necessary funding “secured”. Since that day, it was determined that Tesla and Musk did not have funding “secured”. The Securities and Exchange Commission has determined that this was securities fraud. After the tweet in August, Tesla’s stock price jumped 11% and then fell on back-to-back days. This story may not be over just yet.
August 7, 2018
On this day, Chairman and CEO of Tesla Elon Musk sent this tweet:
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Once the Securities and Exchange Commission (SEC) launched an investigation into the claim, they discovered that funding was not properly secured. Musk went on to say that a Saudi Arabian wealth fund “strongly supported” the transaction needed to take the company private. Musk also stated that his tweet was not meant to state that the transaction was imminent.
The SEC Investigation and Ruling
On September 29, 2018, the SEC charged Musk and Tesla with “failing to have required disclosure controls and procedures”. The complaint from the SEC also stated:
- There must be further corporate governance and reforms at Tesla.
- In 2013, Tesla confirmed they would be using Elon Musk’s personal Twitter account to disseminate concrete corporate information without having any policies or oversight pertaining to the account.
- Musk is to be removed as Chairman of the Board, but can remain CEO.
- Tesla and Musk are subject to a fine of $20 million each.
This agreement between the SEC, Tesla, and Musk is contingent on approval from the court.
Court Demands Justification
Judge Alison Nathan of the New York District Court demands that the SEC, Tesla, and Musk submit a letter by October 11, 2018 explaining why all parties agree that the settlement is fair. Any settlement discussed between the parties is not official until this happens.
If you find yourself in debt, foreclosure, or maybe your business is working on complex transaction, contact Elias Dsouza at Dsouza and Strachan Lawgroup Group. Elias has been assisting individuals and businesses navigate their legal issues for over 15 years.