Can Elon Musk Tweet That? The SEC Is Digging In

Tesla Inc. founder and Chief Executive Officer Elon Musk is facing a U.S. Securities and Exchange Commission inquiry into his bombshell tweet that he’s considering taking the company private. The regulator is likely honing in on his claim -- which Musk tried to clarify in a Monday blog post -- that he’d already secured funding for a potential buyout. Since the electric-car maker’s stock jumped after the Aug. 7 tweet, the SEC will probably want to know whether Musk was being accurate in claiming he had financing. If not, his assertion could amount to a form of market manipulation. Some investors who were caught offguard by the tweet have also questioned whether Musk might have violated the SEC’s fair-disclosure rules by releasing material information in an unconventional way. That sent securities lawyers scurrying to learn more about an obscure SEC decision known as the Reed Hastings Rule.

In his initial tweet, Musk wrote: “Am considering taking Tesla private at $420. Funding secured.” It came as shares were already surging on news that Saudi Arabia’s sovereign wealth fund had built a roughly $2 billion stake in the company over the past few months. He followed that up with additional details in a series of replies to questions and other statements. The next day, Tesla’s directors said they knew about Musk’s plans days before he took to Twitter.