Tesla CEO Elon Musk has a history of extremely bad tweets, and now the U.S. Securities and Exchange Commission wants a judge to hold Musk held in contempt over a tweet about Tesla’s 2019 manufacturing output. Elon, who has said he does not respect the SEC, may be about to change his mind on things.
The crux of the issue is that Elon is now supposed to have his tweets reviewed by lawyers before he posts information all willy-nilly to his Twitter account with its 25 million followers, and allegedly he did not.
“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,” the SEC said in court papers filed in Manhattan federal court.
The tweet in question said that Tesla will make “around 500k” cars this year:
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That’s a problem, because not only is it inaccurate (Tesla’s own estimates in its SEC filings indicate it could make only about 400,000 cars at maximum capacity) but Musk is also supposed to have his posts on social media reviewed before they can be fired off into the ether.
Tesla’s lawyers immediately saw the problem, and tried to fix it, the SEC complaint says:
In addition to not being pre-approved as required by the Court’s Final Judgment Musk’s 7:15 tweet was evidently inaccurate. This undoubtedly explains why Tesla’s Securities Counsel, upon seeing the tweet for the first time along with the general public via Musk’s Twitter feed, immediately arranged to meet with Musk and draft the corrective statement that Musk tweeted out over four hours later.
Musk’s slight correction, which as the SEC notes came over four hours later, appears to have been too little too late for the regulators:
As we all know, however, you can’t just take things back on the internet. The company’s general counsel, Dane Butswinkas, left Tesla the very next day.
But tweeting something bad and taking it back, the SEC says, isn’t the point. The point, the Feds add, is that Elon has never even made an attempt to comply with the agreement that saw Elon stay in control of the company, instead of the SEC removing him from Tesla entirely. Which they illustrate by just posting the transcript of his interview with veteran CBS journalist Lesley Stahl (emphasis is all the SEC):
Lesley Stahl: Have you had any of your tweets censored since the settlement?
Elon Musk: No.
Lesley Stahl: None? Does someone have to read them before they go out?
Elon Musk: No.
Lesley Stahl: So your tweets are not supervised?
Elon Musk: The only tweets that would have to be say reviewed would be if a tweet had a probability of causing a movement in the stock.
Lesley Stahl: And that’s it?
Elon Musk: Yeah, I mean otherwise it’s, “Hello, First Amendment.” Like Freedom of Speech is fundamental.
Lesley Stahl: But how do they know if it’s going to move the market if they’re not reading all of them before you send them?
Elon Musk: Well, I guess we might make some mistakes. Who knows?
Lesley Stahl: Are you serious?
Elon Musk: Nobody’s perfect.
Lesley Stahl: Look at you.
Elon Musk: I want to be clear. I do not respect the SEC. I do not respect them.
Lesley Stahl: But you’re abiding by the settlement, aren’t you?
Elon Musk: Because I respect the justice system
Now, we’re not saying that the SEC specifically included the quote where Elon brazenly admits he doesn’t respect it as a bit of a “oh yeah? We’ll show you,” but we’re not not saying it, either.
Being “held in contempt” basically means you’re breaking the law by disobeying a judge. Anyway, you might remember that there was a big settlement between Musk and the SEC last year–Musk himself and Tesla both had to pay $20 million fines after the infamous “funding secured” tweet.
Bloomberg adds some detail about the situation:
The SEC’s move puts Musk in fresh legal peril, including the possibility that he’ll be barred from running Tesla or any other public company, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. A finding of contempt by the judge would prompt a new round of negotiations over penalties among the SEC, Tesla and Musk.
The SEC declined to comment to beyond the motion, and Tesla has not yet responded to requests for comment. We’ll update this post if anything new comes to light.
Meanwhile, here’s the filing for yourself if you’d like:
Update Feb. 25, 9:28 p.m. est: Musk later tweeted in defense of his original “500k” number, in a reply to a reply to a Wall Street Journal tweet apparently citing that the number was in a Tesla earnings report.