Elon Musk is once again facing legal problems because of his tweets. Both Bloomberg and TechCrunch report that investor Chase Gharrity sued Musk and Tesla for allegedly violating the terms of an agreement with the SEC that governs the CEO’s tweets. Musk continues to send unapproved “erratic” tweets that generate billions of dollars for the company in potential losses and penalties, said Gharrity. The investor also claimed that Tesla had not obtained general advice that could offer advice “not contaminated by Musk”.
The most notable example was May 1, 2020 tweet where Musk said Tesla’s share price was “too high”. This post caused Tesla’s stock to plummet 12% in just 30 minutes, and Musk would go on to say it was neither a joke nor aired in advance.
The first confrontation with the SEC related to a Musk tweet came in August 2018, when he talked about Tesla’s IPO. He reached an agreement with the SEC later that year, only to fight the regulator again in 2019 over EV production claims. An amended agreement of April 2019 requires Musk to obtain pre-approval from a securities attorney before tweeting anything related to important events and financial data.
Tesla did not comment on the process and is believed to have dissolved its PR team.
There is no guarantee that the process will continue. If that happens, however, it could have significant ramifications for Musk and Tesla. While the court cannot impose regulatory consequences like the SEC, it can impose penalties and otherwise pressure Tesla to control Musk’s habits on Twitter.