Posted by Dan Mikrut.
Who knew that typing 280 characters could turn into a $40 Million dollar law suit. This is the cold reality in the case of the SEC vs. Elon Musk. On September 27, 2018 the SEC filed securities fraud charges against Elon Musk, the chairman and CEO of Tesla Motors. On August 7, 2018 Mr. Musk stated in a Twitter post “Am considering taking Tesla private at $420. Funding secured.” According to the SEC, his statement mislead the investing public that he could take the company back at a substantial premium during the current price of the company stock. The information was noted as misleading and false because they lacked any basis in fact. During the time of the tweet Musk had not received or secured funding for the proposed transaction. The stock price of Tesla ended up sky rocketing to $379.57 an increase in $37.58 a share within 24 hours of the tweet going public to Musk’s 22 million twitter followers.
Musk’s questionable actions lead to some serious consequences. The SEC and Musk had settled the case on September 29, 2018. Musk had to abide by 4 main points.
1. Musk must give up being Chairman for 3 years, but will retain a seat on Tesla’s board
2. Two new independent directors must be put on the Tesla Board
3. Musk & Tesla must pay $20 million each in fines
4. Musk must have a an oversight personnel on all his communications and social media accounts
On the personal note, I believe that the SEC went harsh on Musk and the whole ordeal is little obscured. While yes, I do believe Musk made a mistake and posted false information; he was quick to make sure it was known that his tweet was a joke for his wife referencing a 420 joke. This case is another perfect example of the American legal system taking advantage of American businesses and their profits over small legal incidents. I believe that the overpriced fine should’ve only been given to Musk and not the company, because Musk was the only person responsible for the tweet and not the company. As if the fine wasn’t bad enough, the SEC striped Musk of his position and responsibility in his own company that he helped cofound. While the oversight personnel on Musk’s accounts sounds like a good idea, it does also sound a little invasive and going against Musk’s freedom of speech. All in all, I don’t agree with the final verdict in this case because it was too aggressive over a small mistake that Elon Musk made, and shows how the justice system is a costly system that is failing America.
Dan is an IT management major in the Stillman School of Business, Seton Hall University, Class of 2021.
CBS/AP. “5 Things to Know about the SEC’s Complaint against Elon Musk.” CBS News, CBS Interactive, 28 Sept. 2018, www.cbsnews.com/news/5-things-to-know-about-the-secs-complaint-against-elon-musk/.
Henning, Peter J. “What Are the Consequences of Elon Musk’s S.E.C. Criticism?” The New York Times, The New York Times, 12 Oct. 2018, www.nytimes.com/2018/10/12/business/dealbook/musk-tesla-twitter.html