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Tesla Hit With Investor Lawsuit Over Musk’s Market-Moving Tweets

Dec. 16, 2021, 9:11 PM

Elon Musk, fresh off his coronation as Time Magazine’s “person of the year,” is facing more investor scrutiny over his tweets, this time with a Delaware lawsuit filed against Tesla Inc. on Thursday taking aim at a Twitter poll that asked if he should sell millions worth of stock.

The lawsuit, filed in Delaware Chancery Court, accuses Musk of continuing to tweet impulsively and recklessly, in violation of a 2019 agreement with securities regulators that required the company to adopt strict new internal oversight procedures for monitoring his online statements.

“It is unclear who at Tesla, if anyone, is currently reviewing Musk’s tweets” after its last full-time general counsel left in December 2019 and the most recent acting general counsel stepped down in April, the suit says.

Tesla didn’t immediately respond to a request for comment Thursday. The suit doesn’t name Musk as a defendant.

In addition to the poll and related tweets—which allegedly sent Tesla shares tumbling 5% on Nov. 5 and another 12% on Nov. 6—the investor suit targets Musk’s recent “Twitter feud with Sen. Elizabeth Warren,” the Massachusetts Democrat, which allegedly drove the stock price down another 9.6% between Dec. 13 and Wednesday.

The complaint seeks internal files from Tesla under a Delaware law giving broad inspection rights to shareholders who credibly suspect corporate wrongdoing. Records cases often reflect an attempt to drum up fiduciary breach claims.

There’s “a credible basis to believe that Tesla is, among other things, being mismanaged,” the suit says.

The allegations echo a derivative suit filed in March over other allegedly market-moving tweets Musk has posted since settling with the Securities and Exchange Commission in 2018 and reaching an updated agreement in 2019.

“Musk remains undeterred and continues to post on Twitter and social media on matters that are material to Tesla and its stockholders, and which ultimately have an impact on Tesla’s stock prices,” the suit says.

Cause of Action: Section 220 of the Delaware General Corporation Law.

Relief: Disclosure of relevant company documents; costs and fees.

Attorneys: The plaintiff is represented by Heyman Enerio Gattuso & Hirzel LLP and Pomerantz LLP.

The case is Wagner v. Tesla Inc., Del. Ch., No. 2021-1090, complaint filed 12/16/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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