On 7 August 2018, Musk tweeted to his 22m Twitter followers that he could take Tesla private at $420 (£320) per share, which represented a substantial premium to its trading price at the time, that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote.

The SEC’s complaint alleges that, in truth, Musk had not discussed specific deal terms with any potential financing partners, and he allegedly knew that the potential transaction was uncertain and subject to numerous contingencies.

The regulator said Musk’s tweets caused Tesla’s stock price to jump by over 6% on 7 August and led to significant market disruption.

Steven Peikin, co-director of the SEC’s enforcement division, said: ‘Corporate officers hold positions of trust in our markets and have important responsibilities to shareholders. An officer’s celebrity status or reputation as a technological innovator does not give license to take those responsibilities lightly.’ 

The SEC’s complaint, filed in federal district court in the Southern District of New York, alleges that Musk violated antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, civil penalties, and a bar prohibiting Musk from serving as an officer or director of a public company. 

The complaint states: ‘Unlike market participants reading his tweets, Musk knew that his ostensibly “secured” funding was based on a 30 to 45 minute conversation regarding a potential investment of an unspecified amount in the context of an undefined transaction structure.’

Stephanie Avakian, co-director of the SEC’s enforcement division, said: ‘Taking care to provide truthful and accurate information is among a CEO’s most critical obligations. That standard applies with equal force when the communications are made via social media or another non-traditional form.’

The SEC’s investigation is ongoing.

Musk said in a statement: ‘This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.’

Musk has become embroiled in controversy since his tweets about a possible approach from a sovereign wealth fund to provide the backing to take Tesla private, including an on-air interview while apparently smoking marijuana and complaints about the activities of short-sellers of the company’s stock. 

Earlier this month Dave Morton, Tesla’s chief accounting officer, left the electric car maker less than four weeks after joining, citing concerns about the ‘level of public attention placed on the company’, which has seen a string of management changes.

Report by Pat Sweet