Senator Elizabeth Warren has formally requested that the Securities and Exchange Commission (SEC) investigate North American automobile manufacturer, Tesla.
In a letter written to SEC Chair, Gary Gensler, Warren details her desire to investigate the Elon Musk-led multinational firm to determine whether it violated securities laws following the the acquisition of social media giant Twitter by Musk earlier this year.
Warren has several major concerns including, conflict of interest, misappropriation of corporate assets, and negative impacts on Tesla shareholders.
Warren’s principal concern was the fact that Musk funnelled Tesla’s resources into his Twitter takeover, which constitutes a blatant misappropriation of corporate assets. Warren wrote in her letter:
Tesla is publicly owned, and Mr Musk and the Board have responsibilities to shareholders and the public in their management of the company.
The Senator continued:
Mr Musk’s personal wealth – and his personal relationships with Board members – do not shield him or the Tesla Board from meeting basic SEC governance and disclosure rules.
Conflict of interests
Unlike Twitter, Tesla is a publicly traded company and thus must have an independent board to represent it investors’ best interests.
Warren is suggesting that this is not the case at Tesla with the 8-member group inclusive of Musk himself, his brother, a former Tesla executive, and two long-time friends of Musk. She claimed that:
These close relationships may explain the board’s persistent inability or unwillingness to address the concerns posed by Mr Musk’s actions.
Advertising revenues from Tesla competitors
Warren also claimed that Musk’s position of power within the Twitter corporate structure is a clear conflict of interest when considering advertising from other car manufacturers.
Audi and General Motors, Tesla’s direct competitors are heavily relied upon by Twitter for the advertising revenue they provide the site, creating an exceedingly complex challenge when the entity attempts to generate funds.
Despite the appointment of former NBCUniversal executive, Linda Yaccarino as CEO of Twitter, Musk still retains significant control over the enterprise.
Turmoil at Twitter
Many investors and lawmakers alike have shown increasing concern over Musk’s chaotic control over Twitter, with Warren claiming that this has spilt over into his’s management of the electric automotive leader.
This has already had tangible consequences with the investment bank, Oppenheimer & Co. downgrading its Tesla rating for the risk posed by the billionaire’s ownership and management of Twitter alone.
The issue has become so dire that 17 major Tesla investors wrote an open letter in April claiming Musk is simply too distracted to run the company.
Warren vs. Musk
This is not the first time the Massachusetts Senator has aired a complaint against Musk and the Tesla board when Warren wrote a letter to Tesla Chair, Robyn Denholm urging that Tesla stakeholders block Musk’s eventual $44 billion acquisition of Twitter, citing the same issues as have well and truly come to fruition.
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