This is a fact! A 2018 settlement with the U.S. Securities and Exchange Commission (SEC) requires oversight of Elon Musk’s social media activities.
Musk, who recently changed his job title to “Technoking of Tesla“, now faces another lawsuit from a Tesla shareholder, alleging that his “erratic tweets” violate a fiduciary duty.
Tesla Investor Sues Elon Musk for Violating Fiduciary Duty
Investor Chase Gharrity is suing Musk and Tesla for violating the terms of a final judgment requiring the CEO to seek pre-approval of any written communications that could contain information material to Tesla’s shareholders.
A 2018 settlement with the U.S. Securities and Exchange Commission (SEC) required oversight of Musk’s social media activities. The plaintiff alleges that Musk’s “erratic” tweets expose Tesla to potential penalties and fines from regulators, which could send the company’s stock plunging.
The investor is suing Musk and the Tesla board for failing to control the CEO’s social media activities. The lawsuit was filed in Delaware Chancery Court on March 8.
Why Does Musk Have to Seek Pre-Approval for Tweets?
In September 2018, Musk accepted a settlement with the SEC requiring him to step down as the company’s Chairman. The settlement also required Tesla to appoint two independent directors to the company’s board and create a committee of independent directors to oversee the CEO’s social media activities and communications.
Musk and Tesla were also ordered to pay $20 million each to cover the damages suffered by “harmed investors under a court-approved process.”
In April 2019, Musk, Tesla’s board, and the SEC reached an agreement giving the co-founder freedom to use social media, including Twitter, without fear of liability for violating a previous court order that required oversight. The agreement still required Musk to seek pre-approval before publishing tweets about certain financial matters and events.
The 2019 agreement was reached after a legal battle between the SEC and Musk stemming from the Tesla CEO’s August 2018 tweet about “funding secured” to take the company private at $420 per share. The SEC’s complaint accused Musk of committing securities fraud.
Why Do Musk’s Tweets Violate Fiduciary Duty?
The most recent lawsuit filed against Musk and the Tesla board alleges that the co-founder’s tweets do not comply with the April 2019 settlement and violate a fiduciary duty.
The lawsuit cites several tweets, including his tweet saying that “Tesla stock is too high IMO.” The tweets about Tesla’s stock price sent the company’s shares plunging nearly 12% within 30 minutes.
The tweet claiming that Tesla’s stock price is “too high,” which wiped $14 billion off the company’s value, was one of several tweets that covered different topics that day. In another tweet, Tesla’s co-founder demanded to “give people back their freedom.” Other tweets included a vow to sell his possessions.
In an interview with the Wall Street Journal shortly after his Twitter spree, Musk said that he was not joking and confirmed that his tweets were not approved in advance.
What do you think?