New Lawsuit Accuses Tesla of Failing to Control Elon Musk’s Tweeting

Elon Musk has become rather known for his erratic tweets in recent years. He has been censured by the regulators for tweets that could be interpreted as an attempt to pump Tesla stock. He got into a highly publicized Twitter spat with one of the divers who rescued a Thai soccer team when they were trapped in a cave system. And now Tesla is facing a lawsuit from one of its investors alleging that it failed to hire a lawyer capable of acting as a buffer between Musk and his Twitter account.

The lawsuit alleges that CEO Elon Musk favored the hiring of lawyers who would protect him rather than an independent counsel who could effectively say, “Whoa, bad idea,” whenever Musk wanted to publish a questionable tweet. According to the lawsuit, the violations cost investors “billions of dollars in market capitalization.” The paperwork lists investor Chase Gharrity as the plaintiff.

The lawsuit may have stemmed at least partly from a 2018 case brought by the SEC that accused Elon Musk of manipulating Tesla stock when he tweeted that he had a deal to take Tesla private. The SEC found that Musk simply didn’t have the cash to do such a thing. The matter ended with a settlement that included removing Musk from Tesla’s Board of Directors and required him to obtain prior approval for all written communications that could impact investors, including tweets.

Since then, Musk has publicly acknowledged that taking Tesla private would pretty well be impossible, especially now that the stock performed well enough last year to join the S&P 500 index.

The lawsuit alleges that the company failed to hold onto an independent counsel who could stand up to Musk. Tesla does seem to have some trouble holding onto general counsels, having gone through three of them since 2019. One general counsel resigned the day after Musk tweeted, “Tesla made 0 cars in 2011, but will make around 500k in 2019,” likely out of frustration. Musk did later backpedal, saying, “Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.”

Tesla didn’t get close to delivering 500,000 cars in a single year until 2020, when it nearly nailed that goal with 499,550 cars delivered.

The lawsuit alleges a rather lackadaisical attitude from Musk regarding other shareholders. Musk said in a 2018 interview with CBS that he is still the largest shareholder and could call a shareholder vote at any time. It also says that the board of directors fails to stand up to him and has allowed the appointment of at least one general counsel who is “indebted” to Musk, and therefore less likely to stand up to him.

Tesla is currently also fighting a class-action lawsuit that alleges that it attempted to sweep suspension-related safety issues under the rug. Other recent lawsuits include one in which it accused an employee of leaking sensitive data to the media and another in which it alleges that a Chinese media company committed libel by falsely accusing Tesla of tolerating “sweatshop”-style practices at Gigafactory Shanghai.