The tweet that has become Elon Musk's version of Pandora's Box has brought forth a lawsuit from the Securities and Exchange Commission (SEC). Today, the SEC accused Musk of securities fraud when he tweeted that he had the funding secured to take Tesla private back in August.
"Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions," the SEC wrote in a complaint filed in Manhattan federal court today.
"Musk's false and misleading public statements and omissions caused significant confusion and disruption in the market for Tesla's stock and resulting harm to investors."
In the complaint, the SEC says the $420 share price was "based on a 20% premium over that day's closing share price because he thought 20% was a 'standard premium' in going-private transactions."
At the time, that price would have been $419. The complaint goes on to say "Musk stated that he rounded the price up to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend 'would find it funny, which admittedly is not a great reason to pick a price.'"
The SEC is requesting Musk "be prohibited from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act."
This whole mess began on August 7th with Musk tweeting this,
This surprised a number of people and brought forth questions as to who would provide the large amount of funding needed for this. About a week later, Musk revealed that Saudi Arabia's Public Investment Fund (PIF) could provide the necessary funding. This was based on discussions with the fund within the past couple of years. But Musk would pull the plug on this a few weeks after announcing it.
"Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was ‘please don’t do this,” Musk wrote in a blog post.
According to Bloomberg, the SEC was already investigating Tesla for various issues including projection into car sales before Musk made the tweet that brought forth a number of problems.
“This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way,” said Musk in a statement.
"Neither celebrity status nor a reputation as a technological innovator provide an exemption from the federal securities laws," Stephanie Avakian, co-director of the SEC's Enforcement Division said during a press conference.