Last year, Tesla CEO Elon Musk sent out a baffling tweet saying that he had “funding secured” to take the company private at a share price of $420 (which some readers may recognise as the weed number).
It turned out no such deal had been finalised, the Securities and Exchange Commission slapped Musk with fraud charges, and the CEO was eventually forced to settle in court — which led to him paying tens of millions in fines, resigning as Tesla chairman, and agreeing to have officials at the company pre-clear any further tweets that could affect the value of its stock.
Well, Musk did not do that last thing, and the SEC filed to have him held in contempt of court after he tweeted (and later corrected) misleading Tesla vehicle production numbers in February 2019. Musk’s defence, aside from his apparent conviction that he should be able to tweet with impunity, is that preventing him from doing so is an “unconstitutional power grab.”
On Monday, SEC lawyers responded by calling his continued defiance of the agreement “stunning.”
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.
— Elon Musk (@elonmusk) February 20, 2019
Per the Financial Times, an SEC filing on Monday questioned whether he was truly able to make reasonable determinations about whether his tweets would affect stock prices, as well as relayed with palpable frustration that there was no indication Musk had ever let anyone at Tesla screen his tweets as required by the settlement:
[The SEC] dismissed Mr Musk’s argument that he could decide which tweets about Tesla required preapproval by an in-house lawyer at the carmaker, arguing that he had a “demonstrated inability to discern potential materiality”.
.... On Monday the SEC filed its response and said that the point of having a preapproval process was “to protect against reckless conduct by [Mr] Musk going forward”... “It is therefore stunning to learn that, at the time of filing of the [contempt] motion, [Mr] Musk had not sought preapproval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered preapproval policy went into effect,” said the filing by the agency.
In the document, the SEC called it “frankly difficult to follow Musk’s tortured analysis” arguing that he did not need to seek pre-clearance on Tesla tweets from company staff. The agency also wrote that Musk’s defence that he was unaware the February tweet would be seen as material to Tesla’s business “borders on the ridiculous,” as well as questioned whether the CEO had made any sort of good-faith effort to comply with the terms of the settlement.
According to CNBC, punishments that the SEC could pursue include more fines, seeking to have Musk’s activities further restricted, or “removing him from Tesla’s board or helm”—the last of which could seriously impact not just Musk but Tesla, which is struggling to keep its balance sheet in the black, something necessary to fund its lofty ambitions.
Earlier this month, Tesla investors also filed a lawsuit to permanently block Musk’s “unchecked use of Twitter to make inaccurate statements about the company.”