Legal

SEC Says Musk Violated Settlement With Recent Tesla Tweet

The U.S. Securities and Exchange Commission is going after Tesla Chief Executive Elon Musk, preparing to pursue a contempt order over what it says are violations of his fraud settlement with the government agency.

According to a report in Reuters, in a court filing Monday (February 25) the SEC contends Musk violated a settlement for tweeting material information about a buyout of the company; he tweeted that the company will make about 500,00 cars this year. The SEC argues Musk did not get pre-approval before sending out the tweet, which the SEC said was inaccurate and shared with more than 24 million people.

“Musk has thus violated the court’s final judgment by engaging in the very conduct that the pre-approval provision of the final judgment was designed to prevent,” the SEC wrote in its motion, according to Reuters. The SEC wants the judge to issue an order that forces Musk to show why he shouldn’t face contempt charges for violating the terms of the settlement. Musk did fix the tweet four hours later to clarify that the annualized production rate at the end of this year will likely be 500,000 with the company delivering about 400,000.

In a tweet late Monday Musk fired back at the SEC saying: “SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing…” Reuters reported the executive was referring to comments he made in January when he told analysts that Tesla will make 350,000 to 500,000 Model 3s this year.  A lawyer for Tesla and Musk said the tweet was made to reiterate information that was approved and shared when it reported fourth-quarter earnings. While the tweet wasn’t pre-approved, the attorney said Musk believed it was “appropriately vetted, pre-approved and publicly disseminated.” What’s more, Musk made the statement outside of stock trading hours, argued the lawyer.

To settle the charges stemming from Musk’s go-private tweets last year he had agreed in the fall to pay $20 million to the SEC, with the company paying the same amount, and stepped down as chairman. Musk is still CEO of Tesla. The judge who approved that settlement will decide if Musk violated the terms of that settlement.  In an interview with “60 Minutes” in December Musk said none of his tweets are being censored and that the ones that would result in Tesla’s stock moving only need to be scrutinized. “I want to be clear. I do not have respect for the SEC,” he said at the time, according to Reuters.

 

 

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