Tesla is being investigated by the SEC because of Elon Musk’s tweets

Elon Musk might learn an important lesson about tweeting soon

Tesla model 3 first production

The U.S. Securities and Exchange Commission (SEC) is investigating Elon Musk over his tweets regarding Tesla going private.

As Musk’s tweet storm was taking place earlier this week, numerous commentators noted that it was likely illegal for Musk to announce something over social media that would affect the value of Tesla’s stock.

The SEC is apparently asking Tesla about the announcement and why it happened on Twitter rather than via an official filing, according to sources cited by The Wall Street Journal. The main reasoning for these questions seem to be whether or not Tesla respects investor protection rules.

One such rule is called the ‘Reed Hastings rule.’ The rule states that companies must inform shareholders that it may disclose important business information on social media. The rule isn’t actually a law, it’s more of a precedent to make sure companies keep all of their shareholders informed.

Either way, the company is still being investigated to make sure it informed its investors that important company information may come from Musk’s Twitter. If it hasn’t, Tesla may be in deep water.

The SEC is also curious to see if Musk actually had funding lined up for the deal. Since he tweeted that he had “funding secured,” if he didn’t, that’s grounds for a stock manipulation accusation.

Source: Engadget, Yahoo Finance