Sen. Elizabeth Warren, D-Mass., has called for an investigation into Tesla and its board of directors, citing concerns over potential conflicts of interest, misappropriation of corporate assets, and negative impacts on Tesla shareholders linked to CEO Elon Musk’s Twitter activities.
In a letter addressed to SEC Chair Gary Gensler on Monday, Warren expressed her unease with the perceived lack of independence of the Tesla board from Musk, coupled with inadequate disclosures and inaction, which raised questions about possible violations of securities laws and exchange rules under the SEC’s jurisdiction.
Echoes the concerns previously raised by Warren in a communication to Tesla Chair Robyn Denholm in December 2022. This was after Musk orchestrated a $44 billion buyout of Twitter, which involved $13 billion in debt and the sale of billions of dollars worth of his Tesla shares to fund the deal.
The appointment of Musk as CEO of Twitter following the buyout raised eyebrows as he swiftly made substantial changes to the social network and authorized teams of employees from Tesla and SpaceX to assist him there. Warren, citing reporting on the matter, questioned potential violations of labor law in taking Tesla employees to Twitter and criticized Tesla’s board for inadequate shareholder disclosures about the extent of collaboration between the two companies.
Recently, Musk appointed Linda Yaccarino, formerly responsible for global advertising at Comcast’s NBCUniversal, as Twitter’s CEO, sparking hope for the revival of Twitter’s advertising business and Musk’s renewed focus on Tesla and SpaceX.
However, Warren warned that despite Yaccarino’s appointment, Musk’s continued influence as CTO and executive chairman at Twitter might lead to conflicts of interest. She expressed concerns that Musk could prioritize Twitter’s financial gain, even if it meant favorable deals for Tesla’s competitors and potential harm to Tesla. Alternatively, he could use Twitter to benefit Tesla through biased algorithms or free advertising.
It is worth noting that Musk and the SEC have a history of clashes, with Musk facing civil securities fraud charges in 2018 for a tweet about potentially taking Tesla private. He and Tesla settled the charges with fines and a revised consent decree in 2019. The agreement required Musk’s tweets containing material Tesla business information to be reviewed and approved by a securities lawyer at Tesla before posting.
Tesla has yet to respond to requests for comments on this matter. The situation continues to unfold, and the spotlight remains on Tesla’s corporate governance and the impact of Musk’s Twitter involvement on the company’s shareholders and operations. Tesla’s second-quarter earnings report, scheduled for release later this week, will likely attract close scrutiny from both investors and regulatory bodies.