Some have had questions whether Elon Musk could keep his Tesla business and his Twitter business separate. Senator Elizabether Warren (D-MA) is among those who believes there may have been some inappropriate conflicts of interest. On Monday, Warren urged the SEC to take action and investigate Tesla over possible violations of securities laws in regards to Tesla and Twitter.
CNBC first obtained the letter from Warren to SEC Chair Gary Gensler. Warren calls attention to Musk continuing on as CEO of Tesla and CTO of Twitter and refusing to answer concerns about potential conflicts of interest. She also goes on to accuse various members of the SEC of purposeful inaction because of potential ties they may have to Musk. Here's the opening to the letter, courtesy of CNBC:
Dear Chair Gensler,
I am writing to request an investigation into Tesla, Inc., and the company's U.S. Securities andExchange Commission (SEC) disclosures regarding the actions of its Board of Directors (the "Board" ) in managing the apparent conflicts of its Chief Executive Officer, Elon Musk. Mr.Musk's actions since purchasing Twitter and becoming its Chief Executive Officer (CEO) – while remaining Tesla's CEO – have raised concerns about conflicts of interest, misappropriation ofcorporate assets, and other negative impacts to Tesla shareholders. Despite recent and repeated calls from investors to address these actions, the Board appears to have failed to uphold its legal duty to ensure that Mr. Musk act in the best interest of Tesla. The Board also does not appear to have adequately disclosed concerns about these issues to investors, undermining shareholders' ability to make informed voting and investing decisions and to hold their fiduciaries accountable. The Board's inaction and inadequate disclosures, and the close relationships of several Boardmembers to Mr. Musk, raise questions about the effectiveness of their corporate governance and potential violations of securities laws.
Though Mr. Musk recently announced the hiring of Linda Yaccarino as the new CEO of Twitter,this does little to address the concerns to Tesla and its shareholders related to his dual role. Despitehiring Ms. Yaccarino,he is likely to retain “significant control” over the company1 and intends tocontinue overseeing core functions of the business.2 Given the concerns about the actions by Mr.Musk and the Board, I ask that the SEC conduct a review to determine if they have complied withrelevant securities laws.
Musk and the SEC are no strangers to one another. The SEC has previously sued Musk and won over tweets regarding Tesla's stock price, which Musk has appealed. A federal court has since thrown out that appeal and Musk is now required to clear any tweets about Tesla business through a securities lawyer first.
Warren's assertions that Musk could run Twitter in such a way as to divert Tesla money towards maximizing its revenue is certainly something worht taking seriously, especially for stockholders. The potential risks of such a relationship sound like they're worthy of investigation, though it's unknown whether the SEC will actually take any action. We'll keep an eye on this story as it develops.