Tesla CEO Elon Musk has become notorious for his outspoken presence on Twitter. In fact, Tesla and Musk previously paid $40 million in fines to the Securities and Exchange Commission following tweets claiming that he had received funding to make Tesla private. Musk also stepped down as chairman of Tesla as part of this settlement and agreed to submit future tweets to be reviewed by an attorney. However, he allegedly violated that settlement with a tweet last month that claimed that Tesla would produce half a million vehicles this year. The SEC is seeking a finding of contempt against Musk for violating the settlement, since he . allegedly did not ask the attorney to review the tweet before posting it. A finding of contempt could result in additional penalties and restrictions on his Twitter use and control over Tesla. But that is not the only problem that Musk currently faces.
A group of investors in Tesla have filed suit in Delaware Chancery Court against Musk, based on the same tweet. They argue that Musk (as well as other board directors of Tesla) violated their duties to investors by using Twitter to make false statements about Tesla. These statements allegedly undermine the value of the company and the shareholders’ investments. Among other remedies, the plaintiffs are seeking to prevent Musk from using Twitter to make these statements. The lawyers for some of the plaintiffs cited his unresponsiveness to their concerns and his failure to change his behavior after receiving the sanctions from the SEC.
Photo Credit: Sheila Fitzgerald