Democratic Senator Elizabeth Warren asked the SEC to investigate Tesla and its board of directors to determine whether they violated securities laws after CEO Elon Musk took over Twitter last year.
In a nine-page letter to the Securities and Exchange Commission Monday, the Massachusetts senator said Elon Musk’s long list of responsibilities, from owning Twitter to remaining Tesla’s CEO, “have raised concerns about conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders.” Warren added that the electric car company’s board failed to ensure it has acted in shareholders’ best interests.
Chief among Warren’s concerns in the letter: funneling Tesla (TSLA) resources into Musk’s Twitter takeover, conflicts of interest regarding advertising from other car companies, and possible labor law violations when transitioning some Tesla (TSLA) employees to Twitter.
Warren is asking SEC chair Gary Gensler to conduct the review. Although former NBCUniversal executive Linda Yaccarino took over as the new CEO of Twitter last month, Musk has retained significant control over the site.
Some investors and lawmakers have grown increasingly concerned about Musk’s chaotic control of Twitter, which he bought for $44 billion. Warren wrote that that disorder has spilled over into Musk’s management of one of the most influential electric car companies in the United States. Oppenheimer & Co. downgraded its rating on Tesla solely because of risks posed by the billionaire’s ownership and management of Twitter in 2022. In an interview with the Wall Street Journal Friday, tech investor Cathie Wood said she wrote down her Twitter stake by 47%.
Warren noted Twitter relies on advertising from Tesla’s direct competitors, such as Audi (AUDVF) and GM (GM), creating a conflict of interest as the platform is trying to shore up funds.
A group of 17 major Tesla investors in April wrote an open letter to the company’s board complaining Musk is just too distracted to run the company.
“Tesla is publicly owned, and Mr. Musk and the Board have responsibilities to shareholders and the public in their management of the company,” Warren wrote. “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.”
Warren argues Tesla’s board failed to hold its CEO accountable. Because Tesla is a public company, unlike Twitter, it has to have an independent board that will represent investors’ best interests. But the board may not be truly independent, Warren says – the eight-member group includes Musk himself, his brother, a former Tesla executive, and two longtime friends of Musk, the senator wrote.
“These close relationships may explain the board’s persistent inability or unwillingness to address the concerns posed by Mr. Musk’s actions,” Warren wrote.
It’s not the first time Warren has called out Musk and Tesla’s board. Last December, the Democratic senator wrote Tesla shareholders may be hurt by its CEO’s ownership of Twitter in a letter to company chair Robyn Denholm.
In that missive, Warren posed a series of questions about how Tesla’s board is dealing with “conflicts of interest, misappropriation of corporate assets and other actions by Mr. Musk that appear not to be in the best interests of Tesla and its shareholders.”
CNN has reached out to Tesla for comment.
CNN’s Matt Egan contributed to this report.
