“Funding secured.” It’s the tweet that keeps on giving Elon Musk and Tesla investors a major headache.
The Securities and Exchange Commission is suing Musk for fraud, according to a lawsuit filed on Thursday in Manhattan, saying the Tesla chief exec sent a series of “false and misleading” tweets last month on taking the electric car company private. The SEC is also seeking to bar Musk from being an executive or director of any publicly traded companies.
Musk’s tweets “caused significant confusion in the market for Tesla’s stock and resulting harm to investors,” the SEC said in its lawsuit, obtained by TheWrap.
“This unjustified action by the SEC leaves me deeply saddened and disappointed,” Musk said in a statement to TheWrap. “I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
Musk sent Wall Street into a frenzy on Aug. 7, tweeting he was considering making Tesla a private company once again for $420 a share. “Funding secured,” Musk tweeted, adding to the belief a deal was inching toward the finish line.
That tweet, along with several followup tweets on the plan, halted trading of Tesla shares on the Nasdaq exchange. When trading resumed, Tesla had spiked 11 percent to $380 per share. Two weeks later, as the SEC was already “ramping up” its investigation, Musk announced Tesla would remain a public company.
“Musk made his false and misleading public statements about taking Tesla private using his mobile phone in the middle of the active trading day,” the complaint added. “He did not discuss the content of the statements with anyone else prior to publishing them to his over 22 million Twitter followers and anyone else with access to the Internet. He also did not inform Nasdaq that he intended to make this public announcement, as Nasdaq rules required.”
Tesla shares dropped 11 percent in after-hours trading to $273 a share on the news. Musk’s “funding secured” tweet has also drawn scrutiny from the Justice Department earlier this month.
Pamela Chelin contributed to this report.