Elon Musk, the CEO of Tesla, continues to make headline week after week.  On August 7^th, Musk tweeted about taking the company private at $420 a share, causing shares of the stock to skyrocket. On August 27^th, he pulled back the statement.  Now, the Securities and Exchange Commission is taking action against musk for his misleading tweets.

On Thursday, the SEC filed a complaint against Musk for fraud.  The complaint against Musk alleges that he issued misleading information and statements and failed to follow the correct guidelines in terms of notifying regulators regarding “material company events.”  With the complaint, the SEC hopes to bar Musk from serving as an officer or director for any public company.

According to Stephanie Avakian, co-director of the SEC’s division of enforcement, “A chairman and CEO of a public company has important responsibilities to shareholders.  Those responsibilities include the need to be scrupulous and careful about the truth and accuracy of statements made to the investing public, whether those statements are made in traditional forms such as a press release or an earnings call or through less formal methods such as Twitter or other social media.”  She went on to say, “Neither celebrity status nor reputation as a technological innovator provides an exemption from the federal securities laws.”

The SEC complaint highlights nine areas in which they believe Musk was misleading:

1. He had not agreed upon any terms for a going-private transaction with any funding source
2. He had no further communications with representatives of the Saudi Fund beyond their 30 to 45-minute meeting in July
3. He had never discussed going-private with the funding source
4. He had not contacted any additional potential strategic investors
5. He had not contacted any existing Tesla shareholders
6. He had not formally retained any legal or financial advisors to assist with the going-private transaction
7. He had not determined if retail investors would remain invested in the company
8. He had not determined whether they were restrictions on illiquid holdings
9. He had not determined what regulatory approvals would be required

The SEC suit also alleges that “According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a ‘standard premium’ in going-private transaction.  This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend ‘would find it funny, which admittedly is not a great reason to pick a price.'”

Musk is determined to push back against the charges as he feels they are unjustified.  In a statement to CNBC, Musk said, “This unjustified action by the SEC leaves me deeply saddened and disappointed.  I have always taken action in the best interests of truth, transparency, and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”  Musk claims that he was in talks with Saudi investors to have the company bought out, but the talks never came to fruition.

In after-hours trading on Thursday, Tesla shares were down nearly 12% as a result.