Is Elon Musk needling the SEC – if so, is it actionable, unwise?

I have provided below links to two articles from yesterday, about new comments by Elon Musk in which he possibly needles the SEC or the recent claims against him. The articles assert that there was also a drop in Tesla stock price.

Is there a correlation between the comments and the Tesla stock price? There could be, but that question requires additional evaluation and evidence.

Are the comments actionable, i.e., unlawful? At this point I would say, most likely, no they are not directly actionable.

Are the comments indirectly actionable or could they cause an action to be brought in an indirect manner? Perhaps – consider that the board has a responsibility to take actions that are for the benefit of the company and its shareholders – There already is a red flag that Mr. Musk is prone to making public comments some of which can reflect negatively upon himself, or upon Tesla, or upon the Tesla stock price. At law the board, and probably one or more committees of the board possibly including the audit committee, have a responsibility, and a risk management responsibility, to take action to address, prevent, and remedy significant risks in certain circumstances. It is my understanding that the SEC also noted lapses by the Tesla board. Could an action, or a new action be brought against Tesla and its board for failure of oversight and action? I would say, yes, quite possibly so.

Are the comments unwise? In my view, I would say yes, definitely. Ask, what is to be gained by the comments that will benefit Tesla or its shareholders? Nothing that I can see. Additionally, the settlement with the SEC is not yet Court approved. The comments certainly don’t help the settlement approval process – the comments don’t help with the Court or with the SEC.

The Tesla board really needs to take action and get on top of this. Is the board willing to do this? Is the board sufficiently independent? Are any board members going to resign out of frustration or the board’s inaction? Is the board going to speak up, and possibly address these issues publicly? My view is that Mr. Musk needs to be helped with this. 

Below are the links to the two articles:

https://www.yahoo.com/news/teslas-musk-mocks-sec-judge-demands-justify-fraud-010454646–finance.html

https://techcrunch.com/2018/10/04/elon-musk-is-trolling-the-sec-on-twitter/?yptr=yahoo

Best to you, David Tate, Esq. (and inactive California CPA), Royse Law Firm, Menlo Park, California office, with offices in northern and southern California.  My blogs: trust, estate, elder abuse and conservatorship litigation http://californiaestatetrust.com, D&O, boards, audit committees, governance, etc. http://auditcommitteeupdate.com, workplace http://workplacelawreport.com

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Disclaimer. This post is not a solicitation for legal or other services inside or outside of California, and also does not provide legal or other professional advice to you or to anyone else, or about a specific situation – remember that laws are always changing – and also remember and be aware that you need to consult with an appropriate lawyer or other professional about your situation. This post also is not intended to and does not apply to any particular situation or person, nor does it provide and is not intended to provide any opinion or any other comments that in any manner state, suggest or imply that anyone or any entity has done anything unlawful, wrong or wrongful – instead, each situation must be fully evaluated with all of the evidence, whereas this post only includes summary comments about information that may or may not be accurate and that most likely will change over time.

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