Elon Musk's lawyers say tweet did not violate court order
The Tesla Inc chief executive, Elon Musk, shot back against the US financial regulator on Monday, arguing in a filing that a recent tweet about the electric vehicle maker’s production volume did not violate the court’s judgment and there is no basis to initiate contempt proceedings against him.
Musk tweeted on 19 February to his more than 24 million followers that the electric vehicle-maker would produce about 500,000 cars in 2019. That tweet, the SEC argued, violated a September fraud settlement barring Musk from sharing material information about Tesla on social media without the company’s pre-approval. The SEC asked a federal court in Manhattan to hold Musk in contempt shortly after.
But Musk’s lawyers argued on Monday that the tweet complied with the company’s communication policy for senior executives and that the US Securities and Exchange Commission’s request that Musk be held in civil contempt is incorrect on the facts and on the law.
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.
Tesla conceded last month that Musk’s tweet was not pre-approved. But the tweet Musk fired off after the markets closed merely restated prior disclosures on electric car production volumes, the lawyers wrote on Monday, did not disclose material information and did not alter the mix of data available to investors.
The settlement between Musk, Tesla and the SEC resolved an SEC lawsuit over claims Musk had made on Twitter last year that he had “funding secured” to take Tesla private at $420 per share.
As part of that settlement, Musk stepped down as the company’s chairman and he and Tesla agreed to pay $20m each in fines.
Musk had called the regulator the “Shortseller Enrichment Commission” on Twitter after the settlement. One day after the agency started pursuing the contempt order, he tweeted that “something is broken with SEC oversight.”
Renewed Pressure
The renewed public battle between Tesla’s chief executive and the top US securities regulator adds pressure on Musk amid larger financial woes.
Tesla on Monday reversed a recent decision to close all its stores and move
to an online-only sales model, in order to cut the price of its Model 3 sedan by 6%.
The company said it would await the results of a further review on the usefulness of physical locations, and the discount on the original price of the car be “about 3%”.
Legal experts have said the SEC could now pursue multiple avenues, including a higher fine, imposing further restrictions on Musk’s activities or removing him from Tesla’s board or helm.