(Reuters) – Tesla Inc chief executive Elon Musk has been sued by a shareholder who accused him of violating his 2018 agreement with the United States Securities and Exchange Commission for his use of Twitter.
According to a complaint unveiled Thursday night at Delaware Chancery Court, which also names the board of directors of the electric car company as a defendant, Musk’s “erratic” tweets and the failure of Tesla directors to ensure that ‘he complies with SEC regulations exposed shareholders to billions of dollars in losses.
The complaint highlighted several of Musk’s posts on the social media platform Twitter, including his May 1 assessment that Tesla’s share price was “too high,” causing a drop of over $ 13 billion in Tesla’s market value.
Chase Gharrity, the plaintiff, said Musk’s actions and the directors’ inaction caused “substantial financial harm” and that they should pay damages to Tesla, based in Palo Alto, Calif., For default. to their fiduciary obligations.
The lawsuit has been filed even though Tesla’s stock price has almost quintupled since Musk’s “too high” tweet, giving Tesla a valuation well over $ 600 billion, and the SEC has failed. publicly accused Musk of recent violations.
“This could put pressure on the SEC to undertake some kind of recourse,” said Charles Elson, a professor at the University of Delaware and an expert in corporate governance.
Tesla did not immediately respond to requests for comment on Friday. Gharrity’s attorneys, Musk’s attorneys in the SEC case, and the SEC did not immediately respond to similar requests.
The SEC settlement follows Musk’s August 2018 tweet that he had “secure funding” to possibly privatize Tesla in a $ 72 billion deal. In reality, Musk was not close.
Musk and Tesla each paid $ 20 million in civil fines, and Tesla’s lawyers have agreed to pre-check some of Musk’s tweets.
The regulations were later amended to clarify when pre-approvals were required, following an unverified tweet from Musk about Tesla’s vehicle production forecast.
Last April, a federal judge in San Francisco said Tesla and Musk faced legal action claiming that Musk’s privatization tweet defrauded shareholders. This case remains pending.
The case is Gharrity v Musk et al, Delaware Chancery Court, No. 2021-0199.
(Reporting by Jonathan Stempel in New York, Hyunjoo Jin in San Francisco and Chavi Mehta in Bangalore; Editing by Sriraj Kalluvila and Rosalba O’Brien)
Copyright 2021 Thomson Reuters.