Investor Sues Elon Musk Over ‘Erratic’ Tweeting, Claiming Violation Of SEC Settlement

Tesla investor, Chase Gharrity, last week sued Tesla's board and Elon Musk for sending “erratic tweets” which violate an agreement with the U.S. Securities and Exchange Commission. 

The suit, which was filed on the 8th of March and unsealed on Friday claims Musk exposes the company to potential fines and penalties from regulators which could drive down its share price. The lawsuit faults the board for its inability to control the CEO's behavior, which puts the company at risk. 

 This isn't the first time Elon has come under fire for his tweets. In August 2018, he tweeted that the company, Tesla, has secured funding for a private takeover at the rate of $420 per share in a $72 billion transaction.  "Am considering taking Tesla private at $420," he tweeted at about 1 pm on the 7th of August.  This caused Tesla's (TSLA) shares to rise by 6% at the close of business.

This however was untrue and the CEO was charged with securities fraud by the U.S. Securities Exchange Commission for his misleading statement.  After a year's long battle with the Commission, Musk and Tesla were made to pay $20 million each in civil fines, and the company's lawyers agreed to review his tweets concerning the company. Both parties came to a settlement that involved Musk stepping aside as Tesla's chairman for at least 3 years while Tesla appointed two independent directors to the board in place of Musk. 

In February 2019 again, less than a year after his infamous tweet which cost him $20 million, the then 48-year-old CEO tweeted that Tesla is set to produce about 500,000 cars that year but coming back to clarify afterward that the company would be producing at a yearly rate of 500,000 vehicles by the end of the year.  The tweet behind the current lawsuit states, "Tesla's stock is too high imo." This caused the stock to drop about 10% only hours later, decreasing the company's market value by $13 billion. 

The lawsuit states, "Musk's wrongful conduct has caused, and will continue to cause, substantial harm to Tesla." The board of Tesla is also being sued for failing to review the CEO's tweet per the agreement with the SEC.

Musk probably underestimates the influence his tweets have on other investors. There are a lot of investors who make decisions based on the CEO's tweets to his 45 million followers. In February, a new cryptocurrency, Dogecoin

Thursday, went up by almost 59% as Musk posted a picture based on the movie Lion King, which was of him holding up the Doge from the meme which Dogecoin is based upon.