Elon Musk’s announcement that he is planning to take Tesla private has taken many by surprise and it is reportedly not sitting well with the SEC.
The U.S. Securities and Exchange Commission is reportedly probing Tesla over the announcement.
Dow Jones is reporting that the SEC, which regulates public markets, is interested to know why Musk made the important announcement on Twitter and if it is compliant with investor protection rules.
The SEC has reportedly been interested in Musk’s use of Twitter as the CEO of a major public company in other occasions in the past.
He has often made announcements about Tesla that moved the market, but arguably none as relevant to the public market than an announcement that he is considering to take the company off the public market and structure it as a private company.
Tesla released an email that Musk sent to employees explaining his plan in more detail, but only hours after he made the announcement to his Twitter followers.
The company’s board also issued an official statement today.
Some investor-protection law firms have also announced that they are probing Musk’s actions and they are seeking collaboration from people shorting Tesla’s stock who took a loss from the rise in Tesla’s stock price that followed Musk’s tweets.
I am not a market regulation expert and therefore, please take what I say about this with a grain of salt.
While I can understand why Musk’s disclosure through Twitter rubs some people in the wrong way, my understanding is that the SEC has already cleared Musk for a similar situation in the past.
It boils down to disseminating information and there’s no doubt that Musk’s Twitter is very efficient at disseminating information.
Moments after he tweets something, several news outlets post articles about it – ourselves included.
It’s hard to argue that he is discriminating on how he shares any information.
Another issue is that sometimes he jokes on Twitter, which can confuse people, but historically, I don’t remember him joking about any kind of Tesla announcement other than the last April Fools joke.
In conclusion, I don’t see any major issue with Musk announcing this on Twitter when it’s actually true that he is considering and working on this.
What I think happened here is that a lot of Tesla shorts panicked and complained to the SEC, which had to look into it, but I could be wrong.
What do you think? Let us know in the comment section below.