Elon Musk tweet about Tesla violates settlement agreement, US regulator tells court
- The regulator has alleged that Musk violated a September settlement of fraud charges by tweeting material information about Tesla
A tweet about Tesla production targets by Elon Musk was “a blatant violation” of a court order to get his written communications pre-approved, US securities regulators told a judge on Monday, doubling down on the government’s demand to find the electric carmaker’s chief executive in contempt of a previous fraud settlement.
The Securities and Exchange Commission wrote in a filing in federal court in Manhattan that Musk’s February 19 tweet to his more than 24 million Twitter followers claiming that Tesla would build around 500,000 cars in 2019 contained, or could have contained information material to the company or its shareholders.
The ongoing public battle between Tesla’s chief executive and the top US securities regulator adds pressure on Musk, who is struggling to make the company profitable after cutting the price of its Model 3 sedan to US$35,000.
The regulator last month alleged that Musk had violated a September settlement of fraud charges by tweeting material information about Tesla without pre-approval from the company.
In response, Musk had argued that his “single, immaterial” tweet was in compliance with the settlement, and that the SEC’s push to find him in contempt infringed on his free speech.
The fraud settlement between Musk, Tesla and the SEC resolved a lawsuit brought by the regulator over claims Musk made on Twitter in August that he had “funding secured” to take the firm private at US$420 per share. The SEC called those tweets “false and misleading” and a go-private deal never materialised.
As part of that settlement, Musk stepped down as the company’s chairman and he and Tesla agreed to pay US$20 million each in fines.
He also agreed to submit written communications that could materially impact Tesla for pre-approval to the company before publishing them.
“It is therefore stunning to learn that, at the time of filing of the instant motion, Musk had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered pre-approval policy went into effect,” the SEC said in Monday’s filing.
Tesla has backed off a plan to close all its US stores and said it will instead raise prices of its higher-end vehicles by about 3 per cent on average. Last week, Tesla unveiled its Model Y crossover sports utility vehicle, targeted to begin production in 2020.
Musk called the regulator the “Shortseller Enrichment Commission” on Twitter after the settlement, and tweeted that “something is broken with SEC oversight” just one day after the agency started pursuing the contempt order.
Legal experts have said the SEC could pursue multiple avenues, including a higher fine, imposing further restrictions on Musk’s activities or removing him from Tesla’s board or helm.
Tesla published a new communications policy in December for senior executives as part of the settlement. It called for Tesla’s general counsel and a newly designated in-house securities law attorney to pre-approve any written statements about Tesla that could be material.
A disclosure controls committee, made up of board members Brad Buss, Antonio Gracias and James Murdoch, was tasked with overseeing compliance with the new policy.
