A Tesla investor sued Elon Musk and the company board, saying the CEO’s “erratic” tweets violate a settlement with the U.S. Securities and Exchange Commission.
What Happened: Investor Chase Gharrity filed a lawsuit at the Delaware Chancery Court alleging that Tesla Inc (NASDAQ: TSLA) Musk continues to send “erratic tweets,” which violates a settlement with the U.S. Securities and Exchange Commission.
The lawsuit accuses Tesla’s board of failing to control Musk for sending the tweets, even after the SEC directives, causing the company “substantial damage,” including billions of dollars in lost market capitalization, Reuters has reported.
“Musk’s wrongful conduct” and “the failure of Tesla’s board to ensure compliance” have “caused substantial damage” to the company, the lawsuit says.
The lawsuit was originally filed on March 8..
Why It Matters: The lawsuit cited Musk’s tweet in May 2020 where he mentioned “Tesla stock is too high,” which resulted in more than $13 billion loss in Tesla’s market value.
In 2018, Musk had to settle with the SEC after he tweeted that he would take Tesla private in a $72 billion transaction. The SEC charged Musk with committing securities fraud.
Then both Musk and Tesla agreed to pay $20 million each in the settlement. As per the agreement, Tesla was instructed to follow oversight procedures related to Musk’s social media posts, including his tweets.
The SEC has not publicly accused Musk of recent violations, Reuters noted, and Tesla’s share price has shot up in the past 12 months by 534.59% to $693.73, helping to fuel growth in ETFs that hold Tesla shares, such as ARK Innovation ETF (NYSE: ARKK).
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