Elon Musk’s prolonged battle with the SEC over his tweets reached a tentative conclusion on Thursday. For now, he’s still allowed to post and you better believe he will excercise that right.
After being accused of contempt over a series of tweets, Elon Musk exited federal court on Thursday with a judge’s order to meet with Securities Exchange Commission regulators to resolve multiple legal disputes around Musk’s tweets about Tesla.
According to Bloomberg, Judge Alison Nathan ordered Musk and the SEC to meet and send a letter to the court within two weeks about whether they’ve reached any resolution. The Musk Twitter saga lives on.
Musk was in federal court in New York for a hearing on charges of contempt requested by the SEC, the chief Wall Street regulator, which argued that Musk violated an October 2018 settle over securities fraud when he tweeted inaccurate production forecasts on February 19, 2019 despite agreeing to stop using Twitter to make statements about Tesla without the company’s approval.
Compliance with regulators and court orders “not optional it’s not a game, I don’t care if you are a small potato or a big fish,” Judge Nathan said.
Musk “recklessly tweeted out information that has no basis in fact,” SEC attorney Cheryl Crumpton said in court. The courtroom was packed with observers, sketch artists, and journalists.
“This is not someone who’s wantonly saying he doesn’t care about processes and procedures,” Tesla’s lawyer argued. “That’s someone who is trying his best to comply and has been diligent.”
Musk entered the courthouse with a laugh when reporters asked if he respected the SEC. He’s already said plenty of times that the SEC, which he calls the Shortseller Enrichment Commission, isn’t worth his respect. “Something is broken with SEC oversight,” he said in February.
“Tesla’s conduct is also troubling to the SEC,” Crumpton said. “This court ordered Tesla to implement a mandatory pre-approval process, but they are apparently fine with Mr. Musk making up his own procedure.”
She criticized the company for being apparently “unwilling to exercise any meaningful control over the conduct of its CEO.”
I’m no mathematician but, given the amount of money involved, this has got to add up to one of the dumbest federal court cases of all time.
Let’s review the series of unreal events that brought us here.
In August 2018, Musk tweeted that he was “considering taking Tesla private at $420” and had secured funding. That was bullshit, he had not secured funding, and it turns out you can’t just tweet bullshit when you run a public company. The SEC tried to have Musk barred from running a private company.
Musk and the SEC settled on a $20 million fine, his resignation of the position of chairman of Tesla’s board of directors and — and this is surprisingly key — to stop tweeting about Tesla’s business without the company’s lawyers’ approval. Musk has called that an “unconstitutional power grab.”
Musk’s tweets became weirder and less related to Tesla but in February he posted a tweet saying “Tesla made 0 cars in 2011, but will make around 500k in 2019.” That is also inaccurate and Musk proceeded to correct that the company would deliver 400,00 models but that annualized production would be around 500,000.
The SEC argued that Musk should be held in contempt because he “did not seek or receive preapproval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people.”
Now the two parties — not to mention Tesla itself — have two weeks to resolve the dispute or else they may end up right back in court. The courtroom appearance doesn’t seem to be doing Tesla any favors as, combined with news of the company’s biggest sales drop in its history, the auto maker’s stock dropped 8 percent on Thursday.
Update at 5:36pm ET, Musk responded with the following statement after leaving court: “I have great respect for Judge Nathan, and I’m pleased with her decision today. The tweet in question was true, immaterial to shareholders, and in no way a violation of my agreement with the SEC. We have always felt that we should be able to work through any disagreements directly with the SEC, rather than prematurely rushing to court. Today, that is exactly what Judge Nathan instructed.”