The love, hate relationship between Tesla CEO Elon Musk and the SEC reached a new level Monday. The regulator called for Musk to be held in contempt for violating a previous judgment related to his penchant to tweet info that runs afoul of securities rules.
The SEC (U.S.Securities and Exchange Commission) filed a contempt order against Musk. It noted specifically that he violated a fraud settlement by tweeting material information without preapproval. The news sent Tesla’s stock spiraling. It was down as much as 5% during extended trading Monday.
We Knew It Would Lead To This
CCN reported about the latest tweet from Musk that would likely land him in hot water with the SEC.
On Feb. 19, he tweeted:
Tesla made 0 cars in 2011, but will make around 500k in 2019
— Elon Musk (@elonmusk) February 20, 2019
In its filing, the SEC zeroed in on these tweets, stating:
Musk did not seek or receive pre-approval prior to publishing this tweet, which was inaccurate and disseminated to over 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.
Working the SEC’s Nerves
Shortly after the SEC’s filing Monday, Musk tweeted:
Oh hi lol pic.twitter.com/9WvbtTHoxS
— Elon Musk (@elonmusk) February 26, 2019
What, if anything, that tweet has to do with the SEC’s move is anyone’s guess. However, it is interesting timing.
The SEC filed a complaint against Musk in September of 2018. It alleged that he “published a series of false and misleading statements to millions of people, including members of the press, using the social media platform Twitter.”
The SEC found Musk’s “misleading tweets” had caused Tesla’s stock price to jump by more than 6% on Aug. 7, 2018. That’s when he tweeted he could take Tesla private at $420 per share. The misleading tweets caused Tesla’s stock price to jump by more than 6% on that date, according to the SEC.
As part of the settlement, Musk had to pay a $20 million fine. That’s likely chump change for the billionaire. However, the settlement also stripped him of his chairman title, which likely stung his ego a bit.
Only more aggravating was the requirement that Musk seek approval from a newly-created overseer charged with reviewing anything he posts to social media, including Twitter.
No Love Lost
During an interview with the television show “60 Minutes,” Musk said:
“I want to be clear. I do not respect the SEC.”
He said about the chairman role that he’d prefer “to have no titles at all.”
About the tweeting, Musk said:
The only tweets that would have to be, say, ‘reviewed’ would be if a tweet had a probability of causing a movement in the stock [price]. Otherwise, it’s, ‘hello, first amendment.’ Like, freedom of speech is fundamental.
Here’s the “60 Minutes” interview.
Time To Be Serious
Musk is either playing games with the SEC, or simply doesn’t care. For example, on Feb. 20, SEC staff asked Musk and Tesla to confirm whether Musk had complied with Tesla’s pre-approval procedures as required by the court’s Final Judgment.
Tesla responded saying:
Musk’s tweets have been reviewed after their publication, but there is no suggestion that Musk has sought or obtained pre-approval of any tweet prior to publishing it.
Mind you, just the day before, on Feb. 19, Musk had tweeted the gaffe over production numbers, including those for its Model 3. He later tried to correct the tweet, but to no avail to observers who knew this would raise the SEC’s ire.
The SEC’s filing states:
For all the reasons stated, the SEC respectfully requests that the Court enter an order to show cause why Defendant Elon Musk should not be held in contempt of the Court’s October 16, 2018 Final Judgment.
Just last week, CCN was reporting on the jovial Musk joking when discussing the value of Bitcoin. It remains to be seen if he’ll strike a serious tone now that he’s facing contempt charges.
Musk may be indifferent when it comes to the SEC, but the judicial system isn’t known for playing games. The outcome of the contempt request now rests in the New York Southern District Court.