Investor claims “substantial financial harm” and also accuses Tesla board of not forcing Musk to comply with previous SEC orders.
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A Tesla Inc (NASDAQ: TSLA) shareholder is suing chief executive Elon Musk, accusing him of “erratic” tweets that violate share market rules.
Reuters reported that a shareholder named Chase Gharrity claims Musk’s tweets violate his 2018 agreement with the US Securities and Exchange Commission (SEC), which restricted what he can and can’t say on Twitter.
That settlement was one of the penalties arising from SEC’s last investigation of Musk’s tweets.
Court papers show Gharrity also names Tesla board members as defendants for not stopping Musk.
The shareholder accuses the chief executive and the directors of causing him “substantial financial harm”.
The case cites multiple tweets from Musk that allegedly violate market rules, including his famous quip in May that Tesla’s share price was “too high”.
You deserve to be sued by a top investor. The actions you have taken are obvious stock manipulation. Fact. Wake up Elon.
— ClassicRoofing (@roofing_classic) March 13, 2021
That comment caused the market capitalisation of the electric car maker to drop US$13 billion.
The share price has since recovered and delivered a five-fold return since that incident to become one of the hottest stocks of 2020.
When Musk tweets, people listen
Musk’s 2018 penalties came after he tweeted that Tesla was about to be sold as a private entity. The transaction never eventuated.
He and the company subsequently ended up paying US$20 million in fines, as well as agreeing to conditions on his social media content.
Musk and Tesla still face pending legal action about that incident to determine whether it defrauded shareholders.
Perhaps frustrated by his muzzling, Musk has been one of the most vocal users of the invitation-only platform Clubhouse.
But he still holds plenty of sway on Twitter.
In January, Musk simply tweeted “#bitcoin” in a one-word post, and the value of the cryptocurrency surged 15%.
Tesla would later disclose in February that it had bought up US$1.5 billion of Bitcoin. The cryptocurrency soared again after that revelation.
Also back in January, Musk encouraged his Twitter followers to abandon WhatsApp for rival messaging app Signal. That prompted the shares of unrelated Signal Advance Inc to rocket up in value.
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Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.