The Securities and Exchange Commission has charged Tesla founder Elon Musk with making "false and misleading statements" about having funding secured to take the electric car company private.
Despite the statements, made via Twitter during trading hours on Aug. 7, Musk "had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source," the SEC alleged in a civil complaint filed in federal court in New York City.
"Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions," the complaint alleged.
The complaint focuses on a series of tweets in which Musk told his approximately 22 million Twitter followers that he was thinking about a multi-billion dollar transaction that would take Tesla private at $420 per share.
During the next three hours, the SEC said Musk tweeted his hope that current Tesla investors would remain with the company even if it became private, said investors could sell at $420 or continue to hold their shares, and then added that investor support had been confirmed.
"Musk knew or was reckless in not knowing that each of these statements was false and/or misleading because he did not have an adequate basis in fact for his assertions," the SEC complaint alleged.
Between the time of Musk's first tweet and the close of trading on August 7, Tesla shares gained more than 6 percent in value on significantly increased volume, the complaint said.
The shares have since declined sharply in value. After trading hours Thursday, when the complaint was filed, Tesla shares plunged 11.8 percent to $271.52.
Citing the initial market reaction, the SEC said Musk's alleged false and misleading statements "caused significant confusion and disruption in the market for Tesla's stock and resulting harm to investors."
