Inside Tesla CEO Elon Musk’s Fraud Charges by the SEC: Texts, Emails, and Other Evidence

The Securities and Exchange Commission sued Tesla CEO Elon Musk for violating securities fraud laws Thursday afternoon, alleging his Aug. 7 tweet about having “funding secured” to take Tesla private was “false and misleading.”

It was an unusually swift conclusion to an SEC investigation, which can often take many months or even years to result in charges. “With respect to the speed, we believe our actions have the most impact when they’re brought most closely in time to the events that bring them forth,” Steven Peikin, co-director of the SEC’s division of enforcement, said at a press conference discussing the charges against Musk. “Neither celebrity status nor reputation as a technological innovator provide exemption from federal securities laws,” added Stephanie Avakian, the division’s other co-director.

In a 23-page complaint filed in federal court in New York, the SEC made its case for why “Musk knew or was reckless in not knowing” that he was making false and misleading statements about the feasibility of taking Tesla private, an effort he abandoned less than three weeks later. Much of that case relies on text messages, emails, and conversations with Musk and other Tesla executives—a full breakdown of which is below.

Here’s the full timeline of the evidence the SEC is using in its case against Musk, according to the legal complaint:

January 2017: Musk first meets with a sovereign investment fund—the SEC does not specify which one, but according to numerous reports, it is Saudi Arabia’s sovereign wealth fund, so we will refer to it as the Saudi fund. The lead representative of the fund “expresse[s] a verbal desire to make a large investment in Tesla and establish a Tesla production facility in the Middle East.”

July 31: Musk, along with his chief of staff, meet with three representatives of the Saudi fund for 30 to 45 minutes; Tesla’s CFO joins halfway through. The lead fund representative expresses interest in taking Tesla private, and assures that he is “empowered to make investment decisions for the fund.” The fund reps again bring up a potential Tesla production facility in the Middle East; Musk interprets this to mean that the Saudi funding might be “a precondition to the fund’s willingness to take Tesla private,” depending on the amount of money required.

August 2: Musk sends an email to Tesla’s board, chief financial officer and general counsel with the subject line, “Offer to Take Tesla Private at $420.” Musk explains that he arrived at the $420 figure because he added 20% to Tesla’s stock price, thinking it was a “standard premium” for a take-private deal, which came to $419. But he “rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend [the singer known as Grimes] ‘would find it funny, which admittedly is not a great reason to pick a price,’” according to the SEC filing.

In the same email to the board, Musk asks that the “matter be put to a shareholder vote at the earliest opportunity” and says the “offer expires in 30 days.” At the time, Musk believes the chances of the take-private deal actually happening are roughly 50%.

August 3: Telephone call between Musk and Tesla’s board. Musk informed the board that the [Saudi] Fund was interested in funding a going-private transaction.

August 6: Musk has a phone call with a private equity fund partner with experience in going-private transactions. Musk notes that the number of Tesla shareholders needed to be below 300 in order to take the company private, even though Tesla has more than 800 institutional shareholders (plus many retail investors) at the time. The private equity partner tells Musk the transaction he was describing is “unprecedented.”

August 7:

  • 12:48 p.m. (all Eastern Time): Without consulting Tesla’s board, employees or outside advisors, Musk uses his cellphone to tweet, “Am considering taking Tesla private at $420. Funding secured.”
  • 1 p.m.: Tesla’s head of Investor Relations texts Musk’s chief of staff asking, “Was this text [sic] legit?”
  • 1:13 p.m.: A Tesla investor who is friends with Musk’s chief of staff texts the chief of staff, saying, “What’s Elon’s tweet about? Can’t make any sense of it. Would be incredibly disappointing for shareholders that have stuck it out for so long.”
  • 1:23 p.m.: Tesla’s CFO texts Musk, “Elon, am sure you have thought about a broader communication on your rationale and structure to employees and potential investors. Would it help if [Tesla’s head of communications], [Tesla’s General Counsel], and I draft a blog post or employee email for you?” “Yeah, that would be great,” Musk texts back. “Working on it. Will send you shortly,” the CFO replies.
  • 3:07 p.m.: Responding to a Twitter user’s concern about a “forced buyout” in a go-private transaction, Musk tweets, “Def. no forced sales. Hope all shareholders remain. Will be way smoother & less disruptive as a private company. Ends negative propaganda from shorts.”
  • 3:16 p.m.: Musks emails employees about his desire to take Tesla private and posts the letter on the company’s blog.
  • 5:09 p.m.: Replying to an investment bank research analyst asking for clarification about the financing that has been “secured,” Tesla’s head of investor relations emails back, “I can only say that the first Tweet clearly stated that ‘financing is secured’. Yes, there is a firm offer.” Shortly after that, the head of investor relations replies to another research analyst, writing, “[A]part from what has been tweeted and what was written in a blog post, we can’t add anything else. I only wanted to stress that Elon’s first tweet, which mentioned ‘financing secured’ is correct.”
  • 7:20 p.m.: When another Wall Street analyst asks Tesla’s head of investor relations about whether “funding secured” means there is a “firm offer” in the form of a commitment letter or verbal agreement, the investor relations exec replies, “I actually don’t know, but I would assume that given we went full-on public with this, the offer is as firm as it gets.”

August 10: Musk communicates with the Saudi fund about taking Tesla private for the first time since the July 31 meeting.

August 24: At 11:15 p.m. Eastern Time, Tesla and Musk announce that they will not take the company private.

Unspecified date after deciding not to go private: Musk admits, “I thought the vast majority of existing investors would want to maintain their stake, and we would find a vehicle for small investors to participate. That latter part was a fundamental misunderstanding that I just did not know — I thought there would be some way to retain small investors, but there isn’t.”

Sept. 27: SEC charges Musk with violating securities fraud laws that prohibit manipulative and misleading statements, and requests that a federal court in New York order Musk to pay penalties and prohibit him “from acting as an officer or director of any issuer that has a class of securities.” In response, Tesla released a statement from Musk calling the lawsuit “unjustified.”


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