Elizabeth Warren urges SEC to investigate Tesla over Twitter ties, corporate governance

Sen. Elizabeth Warren, D-Mass., despatched a letter urging the U.S. Securities and Exchange Commission to research Tesla and its board of administrators over potential “conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders” associated to CEO Elon Musk’s Twitter takeover.

In the letter despatched to SEC Chair Gary Gensler on Monday, Warren wrote that the Tesla board’s “apparent lack of independence” from Musk, mixed with “inaction and incomplete disclosures, raise questions about possible violations of securities laws and exchange rules which fall under SEC’s jurisdiction.”

The nine-page letter, first obtained by CNBC, reiterates issues Warren had raised in earlier correspondence to Tesla Chair Robyn Denholm in December 2022, after Musk led a $44 billion buyout of Twitter. The take-private deal included $13 billion in debt, and Musk reportedly offered billions of {dollars} price of his Tesla shares to finance the transaction.

A spokesperson for the SEC’s Office of Public Affairs mentioned Gensler “will respond to Members of Congress directly.”

Musk appointed himself CEO of Twitter after the deal closed and rapidly made sweeping modifications to the social community, whereas slicing greater than three-quarters of the employees on the firm and authorizing groups of staff from Tesla and SpaceX to help him there.

Citing CNBC’s reporting on the matter, Warren wrote that taking Tesla staff over to Twitter might have comprised “possible violations of state and federal labor law,” and that Tesla’s board had not knowledgeable shareholders appropriately concerning the ways in which the 2 corporations have labored collectively, or may match collectively.

In current weeks, Musk appointed Linda Yaccarino, who beforehand ran world promoting for Comcast’s NBCUniversal, to the position of Twitter CEO. Her hiring stirred hope that Twitter’s beleaguered promoting business would quickly get better and that Musk would return to concentrate on Tesla and SpaceX.

Early Saturday, Musk admitted that Twitter’s money move stays damaging after 50% advert income declines and “heavy debt.” Tesla is scheduled to report its second-quarter earnings after the bell on Wednesday of this week.

In her letter to the SEC chairman, the senator mentioned that the appointment of Yaccarino nonetheless leaves Musk in control of Twitter, the place he’s now CTO and government chairman, and the association might result in conflicts of curiosity.

Among these, she wrote that at Twitter, Musk might “decide to run the company to maximize badly-needed revenue, even if that includes great deals for Tesla’s competitors and potential injury to Tesla.” Contrarily, she mentioned Musk might decide to “run Twitter to benefit Tesla through favorable algorithms or free advertising.”

Musk and the SEC have already clashed repeatedly. The federal monetary regulators charged Musk with civil securities fraud after he tweeted in 2018 that he was contemplating taking Tesla non-public for $420 per share and had “funding secured” to take action. The tweets brought about a halt in buying and selling of Tesla shares and despatched the corporate’s share worth seesawing for weeks.

Musk and Tesla paid fines and struck a revised consent decree to settle the costs in 2019, however Musk later moved to finish that settlement or modify it. In May 2023, a federal appeals courtroom choose rejected the Tesla CEO’s request to finish the settlement, which requires that any of his tweets containing materials Tesla business info be reviewed and authorized by a securities lawyer at Tesla earlier than Musk posts them.

Tesla didn’t instantly reply to a request for remark.

Disclosure: NBCUniversal is the guardian firm of CNBC.