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Tesla Inc Chief Executive Elon Musk was sued by a shareholder who accused him of violating his 2018 deal with the Securities and Exchange Commission on the use of Twitter.
According to a complaint filed Thursday night at the Delaware Chancellery Court, which also names the electric car company’s board of defendants, Musk is “erratic” tweets and the failure of Tesla’s directors to ensure that it complied with the SEC agreement exposed shareholders to billions of dollars in losses.
The complaint highlighted several posts by Musk on the social media platform Twitter, including his assessment on May 1 that Tesla’s share price was “too high”, causing the market value of more than $ 13 billion to drop. Tesla.
Chase Gharrity, the plaintiff, said Musk’s actions and the directors’ inaction had caused “substantial financial damage” and that they should pay damages to Tesla of Palo Alto, California, for violating his fiduciary duties.
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The lawsuit was filed although Tesla’s stock price has risen nearly five times since Musk’s “very high” tweet, giving Tesla a valuation well over $ 600 billion, and the SEC has not publicly accused Musk of recent violations.
“It could put pressure on the SEC to take some sort of appeal,” said Charles Elson, a professor at the University of Delaware and a corporate governance expert.
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Tesla did not immediately respond to requests for comment on Friday. Gharrity’s lawyers, Musk’s lawyers in the SEC case and the SEC did not immediately respond to similar requests.
The SEC deal followed Musk’s tweet in August 2018 that he had “guaranteed funding” to possibly make Tesla private in a $ 72 billion transaction. In fact, Musk was nowhere near.
Musk and Tesla each paid $ 20 million in civil fines, and Tesla’s lawyers agreed to examine some of Musk’s tweets in advance.
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The agreement was later amended to clarify when pre-approvals were needed, prompted by an unchecked tweet by Musk about Tesla’s vehicle production forecast.
Last April, a San Francisco federal judge said Tesla and Musk must face a lawsuit alleging that Musk’s tweet has become deprived of defrauding shareholders. This case is still pending.
The case is Gharrity v Musk et al, Delaware Chancery Court, No. 2021-0199.