It was a short tweet that looks like it’s going to end up costing Elon Musk big time. He’s being sued by U.S. securities regulators, who’ve filed a complaint against the controversial Tesla chief executive in federal court in New York related to that nine-word tweet he dashed off last month proposing to take the electric carmaker private.
The suit is focused on what the U.S. Securities and Exchange Commission alleges were false statements Elon made related to this tweet:
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
From the SEC’s suit: “Musk’s statements, disseminated via Twitter, falsely indicated that, should he so choose, it was virtually certain that he could take Tesla private at a purchase price that reflected a substantial premium over Tesla stock’s then-current share price, that funding for this multi-billion dollar transaction had been secured, and that the only contingency was a shareholder vote. In truth and in fact, Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source.”
Tesla shares quickly fell some 10 percent after the word of the filing came Thursday afternoon. Both the SEC and Tesla have not yet responded to requests for comment.
Among the highlights from the SEC filing:
“When he made these statements, Musk knew that he had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a ‘special purpose fund,’ and had not confirmed support of Tesla’s investors for a potential going-private transaction. He also knew that he had not satisfied numerous additional contingencies, the resolution of which was highly uncertain, when he unequivocally declared, ‘Only reason why this is not certain is that it’s contingent on a shareholder vote.’
“Musk’s public statements and omissions created the misleading impression that taking Tesla private was subject only to Musk choosing to do so and a shareholder vote.”
“According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a “standard premium” in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price.”
Here’s the full complaint: