New Subpoena Highlights SEC’s Continued Focus On Tesla, Elon Musk

Electric automaker, Tesla, and its CEO, Elon Musk, made headlines once again this week in connection with a 2018 Twitter post. The tweet in question, posted by Elon Musk, read simply: “Am considering taking Tesla private at $420. Funding secured.”[1]

At the time the tweet was posted in 2018, the SEC swiftly charged both Tesla and Musk with securities fraud, over which the parties eventually settled. [1] Now more than three years later, the public has learned of a new subpoena from the SEC relating to the tweet, though the subpoena’s impact and strategic aim are still to be seen.

As evidenced by this series of events, Tesla and the SEC share a turbulent, history. Following the 2018 “funding secured” tweet, the SEC alleged that Musk violated Section 10(b) of the Securities Exchange Act of 1934 along with rule 10b-5.[2] These allegations were based upon the SEC’s contention that the tweet constituted a materially false and misleading statement because despite Musk’s confident tone, he had neither discussed nor confirmed the terms of such a deal with any potential funding source. [2]

The SEC also alleged a securities fraud violation against Tesla in connection with Musk’s 2018 tweet, alleging that the company had violated Rule 13a-15 of the Exchange Act. [3] The regulator contended that in failing to have “sufficient processes in place to ensure that the information Musk published via his Twitter account was accurate [and] complete,” Tesla too had violated federal securities law. [3]

Within its complaint, the SEC noted that Tesla had notified the greater market in 2013 that the company planned to leverage Elon Musk’s Twitter account to share material information about the company with investors. [3] Despite this public strategy, the SEC alleged that necessary disclosure controls had not been implemented by Tesla to ensure that Musk’s tweets were indeed accurate and complete. [4]

While neither Elon Musk nor Tesla admitted to or denied the complaints against them, they each settled with the SEC in 2018. With the settlements came a $20 million fine for each party, along with several other avenues of relief. [4] Some of these settlement terms included that Musk was to step down from his role as Chairman of Tesla for a period of at least three years, as well as the appointment of new independent directors to Tesla’s board. [4]

Additionally, and directly connected to Tesla’s current headlines, the settlement required that a new committee made up of independent directors would be formed, along with increased controls and procedures for overseeing Musk’s online communications, like the 2018 tweet. [4]

The new subpoena, filed in November 2021 and disclosed within Tesla’s recently released annual report via a form 10-K, sheds light on the SEC’s continued oversight strategy of Musk’s public statements regarding Tesla. [1][5] The subpoena was issued on the heels of a Twitter poll posted by Musk. [5] In the poll, Musk asked Twitter users if they thought he should sell ten percent of his stake in the company, to which the market clearly responded – Tesla’s stock price fell 10% shortly thereafter.[5]

Since the 2018 tweet and SEC complaints, Musk has continued to post tweets instigating flurries of market activity amongst investors, and the new subpoena makes it clear that the SEC has continued to monitor Musk’s statements accordingly. [1]

For investors and publicly-traded companies alike, the ongoing SEC-Musk saga is a reminder that no matter how informal a communication may appear, there may well be potential securities law implications. The attorneys at Savage Villoch are equipped to counsel those with questions involving online communications like this one.








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