Tesla CEO Elon Musk has once again gotten himself into trouble over a tweet. Last year, the Securities and Exchange Commission struck a settlement with Musk requiring him to pay tens of millions in fines and resign as Tesla’s chairman over a disastrous tweet in which he claimed he had “funding secured” to take the company private at the curious price of “420.” Now, the SEC is asking the judiciary to hold him in contempt of that agreement for yet another ill-advised Twitter dispatch.
Per the Wall Street Journal, in filings on Monday, the SEC told a federal judge in Manhattan that Musk violated a portion of the settlement requiring him to receive pre-clearance from Tesla officials before making any public statements that could modify the company’s stock price.
At issue is a Feb. 19, 2019 tweet in which Musk wrote that “Tesla made 0 cars in 2011, but will make around 500k in 2019,” which contradicted a Jan. 30 letter to shareholders saying that Tesla would only reach an annualized production rate of 500,000 Model 3s between Q4 2019 and Q2 2020. The total number of Model 3s the company said would be made in 2019, the Journal noted, was 400,000:
Hours after his initial tweets, Mr. Musk clarified in another message, writing, “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.”
The SEC said that Mr. Musk “did not seek or receive preapproval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people.”
Tesla’s defense? Musk just made a mistake, and he issued a prompt correction that was pre-reviewed by the appropriate Tesla officials.
“Although the 7:15 PM EST tweet was not individually preapproved, Mr. Musk believed that the substance had already been appropriately vetted, preapproved, and publicly disseminated,” an outside counsel working for Tesla, Bradley Bondi, wrote in a letter dated last week, according to the Journal. “Moreover, the tweet was made outside of NASDAQ trading hours.”
According to the Washington Post, a Tesla attorney reached out to Musk to work with him on drafting the correction.
It’s not clear what penalties Musk might face if he is found in violation of the settlement, but according to the Journal, it is unlikely he will face the harshest possible penalty: being barred from serving as an officer of a public company. Former Financial Industry Regulatory Authority enforcement director Brad Bennett told the Journal that the judge could impose restrictions on Musk’s activities, or any other solution “that they believe are necessary to get him to comply with the settlement.”
Musk has repeatedly indicated his scorn for the SEC’s authority.
Last year, Musk reportedly rejected an initial settlement offer from the agency over the “funding secured” tweet, triggering a lawsuit. In October 2018, after he had agreed to step down as chairman and pay hefty fines, he mocked the SEC as the “Shortseller Enrichment Agency” and later claimed the tweet was “worth it.” In December 2018, he made it known that he has “no respect for the SEC” and asserted in a CBS interview that no one was monitoring his tweets unless they “had a probability of causing a movement in the stock.”
Asked by CBS how Tesla would know whether his tweets would move the stock unless they had pre-cleared them, Musk responded, “Well, I guess we might make some mistakes. Who knows?”
Hmm.
The CEO has also been involved in a number of other headache-inducing (and mostly self-inflicted) Twitter controversies. Those include an ongoing defamation lawsuit over a cave diver who contributed to the rescue of a Thai soccer team, who Musk claimed was a pedophile, as well as the time he went on an anti-media tirade that ended in him praising a website tied to an alleged sex cult.