The Wall Street Journal or WSJ reported on Tuesday that a US securities inspector notified Tesla Inc (TSLA.O) last year that Chief Executive Officer Elon Musk's use of Twitter had twice failed to monitor his tweets to be preapproved by the company lawyers.
A Tesla shareholder is suing the company's board of directors and Musk for continuing to publish ‘erratic tweets.’ The complaint, filed in Delaware Chancery Court by investor Chase Garrity, was unsealed on Friday.
It claims Musk is exposing the company to potential regulatory fines and penalties, which might lead to a drop in the business's share price. The lawsuit accuses the board of failing to oversee Musk's activities, which it claims puts the company at risk. The deal allows Musk to tweet whenever he wants, except when it comes to specific events or financial milestones.
The April 2019 agreement was the result of a years-long battle between Musk and the SEC that began with his controversial August 7, 2018 tweet. Musk and Tesla reached an agreement with the SEC without admitting any wrongdoing.
On February 19, 2019, Musk tweeted that Tesla would produce ‘about’ 500,000 cars that year, reigniting the debate.
The post caused shares to plummet roughly 12% in the half-hour following his stock price tweets. Musk then clarified in an email to the Wall Street Journal that he was not joking.
According to the lawsuit, the Tesla board has also failed to hire a general counsel ‘who can provide advice untainted by Musk's activities that have resulted in ‘severe damage,’ including billions of dollars in market value losses.
The SEC stated in a letter addressed to Tesla in 2019 and 2020 that tweets Musk made about Tesla's solar roof production quantities and stock price were not preapproved by Tesla's lawyers, according to the Journal, citing previously unreported records of communication.
The WSJ stated, citing a letter signed by a senior SEC employee, that "Tesla has abdicated the duties demanded of it by the court's ruling." The SEC and Tesla did not immediately reply to calls for comment.