Tesla responds to Musk legal warning with threat of ‘notice of corrective action’

This article is over 2 months old The Wall Street bank says the automaker owes it $162m because Musk said investors who bought shares in Tesla with debt payments would have ‘criminal liability’ JPMorgan…

Tesla responds to Musk legal warning with threat of 'notice of corrective action'

This article is over 2 months old

The Wall Street bank says the automaker owes it $162m because Musk said investors who bought shares in Tesla with debt payments would have ‘criminal liability’

JPMorgan Chase has served Tesla with a legal letter demanding the carmaker pay it $162m because it used “erroneous” statements in a blog post to say investors who had purchased debt issued by Tesla would have “criminal liability” under US securities law.

Tesla said in response it planned to file a statement of defense. “The claim is without merit and we will be filing a statement of defense,” it said.

The US securities and exchange commission (SEC) has been investigating the stock transaction after an all-stock deal was announced for SolarCity, which Tesla acquired last year. It has not said what it has found and it is not clear if any sanction has been imposed.

Musk’s first tweet of the project blamed a computer malfunction and drew mocking replies, despite the agreement’s transparency with investors as a whole – a practice called “responsible disclosure”.

The letter, dated 2 March, requests a 60-day “corrective action” that would include what it termed an “affidavit of facts” explaining why its post wasn’t inaccurate.

The letter (pdf) states: “Tesla Corporation’s securities law defence, or similar similar defense … generally is based on factual misrepresentations and intentional misrepresentations that the Commission finds to be material facts.”

The letter cited a series of tweets by Elon Musk in the mid-morning of 21 March that suggested the SEC’s role was implicated in the deal.

“As part of this investigation, we, along with others, are currently reviewing any involvement that Elon Musk may have had, whether direct or indirect, that might have been inappropriate,” the letter reads.

The regulator received a copy of the letter on 8 March, according to filings on Monday.

Tesla shares slumped on 3 March after Musk tweeted about the $2.8bn stock sale, a thinly traded move that sent the company’s market value by $1.9bn.

The shares have since recovered after Musk said he would hold onto the shares that he sold and resolved with SolarCity investors on 7 March to retain a majority stake in the company.

Musk is Tesla’s most high-profile executive, and investors have come to expect the outspoken Silicon Valley entrepreneur to be involved in almost every major project at the company.

More than a year ago, Musk acknowledged in a New York Times interview that his tweets were not always subject to the same regulatory scrutiny as official statements by the company. “It’s a version of free speech,” he said.

Musk sparked worries about his mental stability after the SolarCity deal. Two weeks ago, he wrote on Twitter that he could stand for a fifth time as a candidate for election to the US House of Representatives, citing his passion for electric cars.

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