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Tesla Inc chief executive Elon Musk was sued by a shareholder who accused him of violating his 2018 agreement with the Securities and Exchange Commission for his use of Twitter.
According to an unsealed lawsuit Thursday night at Delaware Chancery Court, which also names the electric car company’s board of directors as a defendant, Musk is “erratic.” tweets and the inability of Tesla’s directors to ensure it complied with SEC regulations exposed shareholders to billions of dollars in losses.
The complaint highlighted several of Musk’s posts on the social media platform Twitter, including his May 1 assessment that Tesla’s stock price was “too high,” causing a drop of over $ 13 billion in Tesla’s market value.
Chase Gharrity, the plaintiff, said Musk’s actions and the directors’ inaction caused “substantial financial harm” and that they should pay damages to Tesla, based in Palo Alto, Calif., For having violates its fiduciary duties.
ELON MUSK’S FORTUNE LOSES $ 27B AS TESLA’S STOCK FALLS
The lawsuit has been filed even though Tesla’s stock price has almost quintupled since Musk’s “too high” tweet, giving Tesla a valuation well over $ 600 billion, and the SEC has failed. publicly accused Musk of recent violations.
“This could cause the SEC to take some sort of recourse,” said Charles Elson, a professor at the University of Delaware and an expert in corporate governance.
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Tesla did not immediately respond to requests for comment on Friday. Gharrity’s attorneys, Musk’s attorneys in the SEC case, and the SEC did not immediately respond to similar requests.
The SEC settlement followed Musk’s August 2018 tweet that he had “secured funding” to potentially make Tesla private in a $ 72 billion deal. In reality, Musk was not close.
Musk and Tesla each paid $ 20 million in civil fines, and Tesla’s attorneys agreed to review some of Musk’s tweets ahead of time.
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The regulations were later amended to clarify when pre-approvals were needed, following an unverified tweet from Musk about Tesla’s vehicle production forecast.
Last April, a federal judge in San Francisco said Tesla and Musk faced legal action claiming Musk’s privatization tweet defrauded shareholders. This case remains pending.
The case is Gharrity v Musk et al, Delaware Chancery Court, No. 2021-0199.
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