Judge Delivers Musk, SEC an Ultimatum
Treating Tesla CEO Elon Musk and the U.S. Securities and Exchange Commission like a pair of squabbling kindergarteners, a federal judge handed down a message to both on Thursday. Basically, figure out your shit.
The two sides remain locked in a battle sparked by a true product of our time — tweets. The SEC claims Musk’s recent use of Twitter violates the conditions set out in the settlement reached between the regulator and Tesla last year, a settlement resulting from a lawsuit over … tweets.
“Put your reasonableness pants on,” Judge Alison Nathan told the two parties in a New York City federal court yesterday.
If you’re not aware of what brought Musk and the SEC to this point, please read this for background:
On February 19th, Musk tweeted that his company expected to “make around 500k” cars by the end of the year. He corrected himself a few hours later, tweeting, “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.”
To use an overused term ripped from modern American headlines, the SEC pounced. In an earnings report issued not long before the tweet, Tesla claimed its forecast for the year was 400k vehicles. To the SEC’s eyes, this was misleading information, and a clear violation of the settlement agreement. It called on a federal judge to hold Musk in contempt of court.
The two sides disagree on whether the tweet was “material,” meaning information of interest to shareholders that should only be disseminated through official channels. The settlement Musk agreed to contained a directive for Musk’s tweets to be overseen by a third party to prevent the kind of shenanigans seen last August, when Musk tweeted that he was planning to take the company private, then pulled a U-turn.
Musk’s lawyers claimed such an order would violate their client’s constitutional rights. The SEC claimed Musk and his team were being ridiculous.
In a filing to the U.S. District Court for the Southern District of New York last month, the SEC wrote:
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. Many of these tweets were about the topics specifically identified by Tesla in its own policies as potentially material to shareholders. Musk reads this Court’s order as not requiring pre-approval unless Musk himself unilaterally decides his planned tweets are material.
On Thursday, Judge Nathan sent both parties home, giving them two weeks to decide exactly how Musk’s tweets are supposed to be monitored. Only then will she look into whether the CEO breached the court-imposed conditions. If Musk is found in contempt, there’ll be an even shorter leash coming his way — a stiff fine, and perhaps even a demotion from his position atop the company.
The New York court hearing came the day after Tesla released lackluster quarterly production and delivery figures, surprising some analysts and worrying investors.
Join the conversation
Latest Car ReviewsRead more
Latest Product ReviewsRead more
- Kwik_Shift Important consideration when choosing your next vehicle. Its not only your own death, or of your passengers, but the possible lifetime of crippling injuries.
- Teddyc73 Can we all once and for all stop calling this things "tacos"? Please!
- David S. Bear Tooth and Chief Joseph highways.
- StormEagle 400 miles range
- Inside Looking Out Enforcing laws? It is so yesterday! Welcome to California!
The SEC's conduct, to quote the SEC, "borders on the ridiculous"... how much am I paying for this crap? "Musk is a fraud"... hmmmm... is he a *total* fraud? Are all my Paypal transactions about to be reversed? Those SpaceX booster landings look awfully real. And believe it or not, even if Tesla closed up shop tomorrow, they have had a massive impact on the global automotive industry.
SEC should force Elon Musk to step down from his management role and bar him from making any public statements with the violation to be a felony offense punishable by a federal prison time up to 20 years in prison with no parole for each offense. Multiple offense should be consolidated to not more the 60 years in prison.