For more than a few decades, Twitter has been one of the most recognized social media platforms for people to connect with celebrities and public figures. It has allowed multitudes of people to interact with the otherwise unreachable personages and has bridged this gap between the two very effectively. Whether this power is exercised to bring about a positive change or just used blatantly for mass deception is totally dependent on the people using it. With the celebs dominating the social media, most of their statements on social media platforms are deemed accurate by the general populous especially when their statement is in accordance to their line of work.
Elon Musk is a technological icon of the 21st Century and a leading figure in sciences and innovation, having around 22 million followers on Twitter. Being the CEO and product architect of Tesla Inc. as well as being the CEO of SpaceX and cofounder of PayPal and Neuralink, Elon Musk holds a vast reputation among the masses as a technological innovator and experienced business magnate. On August 7, 2018, Musk tweeted that he was taking it under consideration to take Tesla, Inc. private at $420 per share with the funding secured. In further tweets, he elaborated his consideration stating that the shareholders can either sell off at $420 or hold shares and go private with Tesla. Moreover, replying to worrisome investors’ tweets, Musk further stated that he hoped that all investors remain with Tesla even when they go private, went further to suggest a remedy for doing so and cleared out that he did not want to impose on anyone, forcing them sell away. He claimed that it would be “smoother” if all the shareholders remain with Tesla. In an elaborate email to all Tesla employees the same day, Musk stated everything there was on the table and tweeted this too on his Twitter account sharing that the reason for the decision not being final yet, is that it is “contingent on a shareholder vote”.
The Securities and Exchange Commission charged Elon Musk with securities fraud in the event of these tweets claiming them “false and misleading”. This complaint alleged that the truth of the matter is that the claims of such a potential transaction that was portrayed as factual and very inbound, was totally indefinite and was not subject to just one contingency as the tweets depicted, but numerous other contingencies. These tweets by Elon Musk caused the stock price of Tesla to spike by over six percent on the day the tweets were posted on Musk’s Twitter account, leading to major disturbance in the stock market. Press releases by the SEC further put suspicions on the intent behind these tweets stating that there are important responsibilities of a corporate officer towards his/her stockholders and any such officer’s social reputation or celeb status does not strip him/her of these responsibilities. It was further added that being a Chief Executive Officer one has to be very careful to provide only factual and accurate details and that this criterion only increases in its significance when statements are issued via some social media platform.
The complaint by the Security and Exchange Commission was filed with the federal district court in the Southern District of New York, declares that Elon Musk disrupted the “anti-fraud provisions of the federal securities laws”, with hopes of the imposition of an everlasting ban, disgorgement, civil fines, and a clause barring Elon Musk from the servitude for any public company in the positions of an officer or director. According to recent developments in this case, a settlement was agreed upon by Musk and Tesla Inc. which required Musk to step down as the CEO of Tesla Inc. along with other clauses. On September 29, 2018, the Securities and Exchange Commission made an announcement that neither accepting nor refusing the claims made, Elon Musk and Tesla Inc. agreed to settle the alleged charges made against them in an arrangement where:
- Elon Musk will forfeit his position as the Chairman of Tesla with him being replaced by an independent Chairman. A further clause states that he will be unable to be the Chairman for 3 years.
- Two independent directors will be hired by Tesla on their board of directors,
- A new committee of independent directors will be established by Tesla to oversee Musk’s further communication over social media,
- Elon Musk and Tesla Inc. will pay individual civil penalties of $20 million which will be distributed to the investors that these tweets harmed.
Although the settlement is still subject to the court’s approval, it might very well be the final verdict. SEC claims that this settlement is aimed mainly to avoid further market disturbance and to revert the harm done to Tesla’s stakeholders.