Sen. Elizabeth Warren, D-Mass., has called on the U.S. Securities and Exchange Commission to look into Tesla and its board of directors in relation to the CEO Elon Musk's Twitter takeover for the possibility of "conflicts of interests, misappropriation of corporate assets, and other negative impacts to Tesla shareholders." A nine-page letter, which CNBC was first to obtain, was sent to SEC Chair Gary Gensler on Monday. In the letter, Sen. Warren expressed her concern that the Tesla board's "apparent lack of independence" from Musk, combined with "inaction and incomplete disclosures," may have led to violations of securities laws and exchange rules, which fall under the SEC's jurisdiction.
Senator Elizabeth Warren, of Massachusetts, sent a letter to the U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler on Monday, calling for the agency to investigate Tesla and its board of directors regarding potential "conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders" stemming from CEO Elon Musk's Twitter takeover last December. In the nine-page letter which was first obtained by CNBC, Warren noted her prior concerns to Tesla Chair Robyn Denholm about Musk's $44 billion Twitter buyout which included $13 billion in debt. The senator further highlighted CNBC's reporting of Tesla employees assisting Musk at Twitter, which may have constituted "possible violations of state and federal labor law," as well as insufficient disclosures to shareholders about the two companies' collaboration. Subsequently, Linda Yaccarino, formerly of NBCUniversal, was appointed Twitter CEO; however, Warren says Musk remains in charge at Twitter as CTO and executive chairman, creating possible conflicts of interest. Musk recently revealed that the platform suffers from "heavy debt" and 50% ad revenue decreases. Tesla is expected to report its second-quarter earnings later this week.
She wrote that at Twitter, Musk could choose to manage the company "in order to maximize necessary revenue, even if it means providing advantageous deals for Tesla's opponents and possible harm to Tesla"; or, he could run the social media platform "to benefit Tesla by way of favorable algorithms and free promotion". Musk and the SEC have already had multiple conflicts; the federal financial regulators accused Musk of civil securities fraud after he tweeted in 2018 his intentions of taking Tesla private for $420 per share and indicated to have "funding secured". This sparked a cessation in the trading of Tesla's stocks and the company's share price changed dramatically over the succeeding weeks. Musk and Tesla paid fines and reached an updated consent decree in late 2019, however Musk later moved to end that accord or modify it. In May 2023, a federal appeals court judge repudiated Musk's bid to terminate the agreement, which requires any of his tweets that contain material Tesla business information to be examined and acknowledged by a Tesla legal advisor before he publishes them.Tesla did not immediately respond to a request for comment.Disclosure: CNBC is a subsidiary of NBCUniversal.
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