SEC Says Tesla's Elon Musk Not Sticking To Deal - Asks Judge To Rule Musk In Contempt
Elon Musk does not have to stop tweeting, but he does have to have market-moving tweets vetted by his company's internal regulators. The problem is, he just can't stop himself from posting market-moving product forecasts on Twitter without having his facts checked by his staff. Now the SEC is asking a judge to hold Musk in Contempt.
The apparent violation stems from Musk's Twitter post dated February 19th at 4:15 pm, just 15 minutes after the market closed. Musk then changed this forecast in a meaningful way by adding a second tweet under this one 18 hours later saying, "Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k." Thus, Musk changed his company's possible revenue projection by 20% in a period of 18 hours in a public forum. This is a very unusual way for a public company's officer to act. How unusual? The person tasked with reviewing Musk's tweets related to such topics, Tesla General Counsel Dane Butswinkas, quit Tesla the day after Musk published the tweets without review.
The SEC said in a filing to the NY judge overseeing the case that the SEC, "...respectfully moves this Court for an order to show cause why Defendant Elon Musk should not be held in contempt for violating the clear and unambiguous terms of the Court’s October 16, 2018 Final Judgment.” The SEC added, "He once again published inaccurate and material information about Tesla to his over 24 million Twitter followers, including members of the press, and made this inaccurate information available to anyone with Internet access."
Rather than apologize, Musk has doubled-down on his SEC poke in the eye with a tweet last night that says, "SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing …" This followed by an emoji smiling.
Lower in that thread Musk panders to the judge, saying, "Indeed. I have great respect for judges. It’s not perfect, but, in general, we should be very glad of the US justice system."
Those interested in the background story that put Musk in a position of violating SEC rules can read our background story on Musk's failed attempt to use greenwashed Saudi oil money to take Tesla Private and his false statements made to the public about the deal.
Setting aside the legality of Musk's behavior, the man made a deal. That he is apparently not sticking to the deal would seem to reflect poorly his character.
Post-publication update: According to Reuters, "A federal judge on Tuesday ordered Tesla Inc Chief Executive Elon Musk to explain by March 11 why he should not be held in contempt for violating a settlement agreement with the U.S. Securities and Exchange Commission."