The Chief Executive Officer of American electric car and battery maker Tesla Elon Musk has been sued by a shareholder who accused him of violating his 2018 settlement with the US Securities and Exchange Commission (SEC) over his Twitter use.
According to a complaint in the Court of Delaware, which also names the electric car company’s board as defendants, Mr. Musk’s “erratic” tweets and the failure of Tesla directors to ensure he complied with the SEC settlement have exposed shareholders to billions of dollars of losses.
The complaint highlighted several posts on the social media platform Twitter by Mr. Musk, including his assessment last May 1 that Tesla’s stock price was “too high,” prompting a more than $13 billion tumble in Tesla’s market value.
‘Substantial financial harm’
Chase Gharrity, the plaintiff, said Musk’s actions and the directors’ inaction have caused “substantial financial harm.”
The lawsuit was filed even though Tesla’s share price has soared nearly fivefold since Mr. Musk’s “too high” tweet, giving Tesla a valuation well above $600 billion, and the SEC has not publicly accused him of recent violations.
“It could pressure the SEC into taking some sort of recourse,” said Charles Elson, a corporate governance specialist.
The SEC settlement followed Mr. Musk’s August 2018 tweet that he had “funding secured” to possibly take Tesla private in a $72 billion transaction. In reality, Mr. Musk was not even close to the deal.
Mr. Musk and Tesla each paid $20 million in civil fines, and Tesla lawyers agreed to carefully examine some of his tweets in advance. The settlement was later amended to clarify when pre-approvals were required, prompted by an unvetted tweet by Mr. Musk about Tesla’s vehicle production forecast.
Last April, a San Francisco federal judge said Tesla and Musk must face a lawsuit claiming Musk’s going-private tweet defrauded shareholders. That case remains pending.
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