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Never tweet. C & # 39; a SEC action was taken Monday evening, when the US Securities Regulatory Body asked a federal judge to try Tesla's CEO, Elon Musk, as a contempt of court for a short series of tweets that he had published last week.
The SEC's request came out of a February 19th Twitter-inspired CEO publication, which said: "Tesla made 0 cars in 2011, but will manufacture about 500,000 in 2019." About four and a half hours later , Musk corrected himself: "Wanted to say an annualized production rate at the end of 2019 probably around 500 000, or 10 000 cars / week. Deliveries for the year are estimated at approximately $ 400,000. "
A regular schmo that goes on a blunder on Twitter may not be a big deal. But Musk is leading a publicly traded company and, more importantly, has reached a $ 20 million settlement with the SEC after tweeting last September. As part of this settlement, Tesla (which also paid a $ 20 million settlement for the Musk Sur Share) agreed to put in place a "pre-approval" process for all communications from its executives with shareholders, including tweets. (The settlement also excluded Musk from his position as president for at least three years and has since been replaced by former Australian telecommunications executive Robyn Denholm.)
In court documents filed today, the SEC released a series of e-mails with Musk's lawyer in which the electric car manufacturer's lawyers admit that the tweet of February 19 "was not individually pre-approved". . The lawyers explained that Musk thought he was only reiterating the forecasts first published in Tesla's fourth-quarter earnings report, released in late January. There, Tesla wrote that it "targets an annualized production of Model 3 greater than 500,000 units between the fourth quarter of 2019 and the second quarter of 2020".
But the emails included in the SEC 's petition today also show that Musk' s initial tweet about vehicle production has alarmed Tesla 's legal team. In an e-mail response sent to the SEC on Feb. 20, Tesla said that when the lawyer responsible for monitoring Musk's communications had seen the initial tweet about the production of vehicles, he "immediately made an appointment." to meet Mr. Musk at the Fremont factory ". According to the email, Musk and the lawyer worked on writing the follow-up clarifying tweet. The email between Tesla and the SEC also indicates that Musk's initial tweet was "well outside the NASDAQ trading hours" (the market closes at 4:00 pm Eastern time, Musk sent both tweets at 7:15 pm and at 23:41, respectively.)
What does it mean if Musk is found guilty of contempt of court? The sentence would be up to the federal judge, said Peter Haveles, a lawyer with the Pepper Hamilton law firm. "If the SEC takes it, it is highly likely that the district court will fined Mr. Musk and leave him on a short leash, strongly warning that further violations could result in M's ban." Musk for a while. time as an officer or director of an open company, "he says.
Haveles also says that it seems like the SEC has a solid case. "The SEC took the time to collect Tesla's evidence before filing its case," he says.
The settlement itself comes from a tweet that Musk sent in August 2018, in which he wrote that he was planning to protect Tesla privately and that he had "financing". guaranteed". Musk quickly acknowledged that he had not secured funding for the plan and Tesla announced that it would remain public. The course of action trampolated. In September, the SEC sued Musk and Tesla for "false and misleading statements"; Musk and the company settled the case two days later. Tesla is still facing a class action brought in August by shareholders who claim that the tweet "secured financing" cost them money.
Musk has a long history of antipathy towards the SEC. In October, even after settling with the federal agency, Musk called it the "Shortseller Enrichment Commission" in a tweet. (Musk also has a long history of dislike of those who sell shares in his company.)
And in December, Musk told CBS 60 minutes that he does not respect the SEC. He also said that the only tweets to be reviewed were those that could change the stock price of the company. When the interviewer asked how Tesla could know what tweets would do this, Musk replied, "Well, I guess we could make mistakes. Who knows? The exchange is cited in the SEC's motion for contempt, as evidence that "Musk did not make a diligent or good faith effort to comply" with the terms of its settlement.
In the hours following the filing of his motion by the SEC, Musk decided – what else? – Twitter. "The SEC has forgotten to read the transcript of Tesla's results, which clearly indicates between $ 350,000 and $ 500,000. How embarrassing … ", he wrote. Tesla representatives did not respond to a request for comment.
Last week, Tesla's General Counsel, Dane Butswinkas, stepped down after just two months of work. The well-respected trial lawyer would have been hired to represent the company in its dealings with the SEC. Bloomberg reports that Butswinkas left his post "due to a cultural crisis at Tesla and the desire to return to his full-time trial." As the legal quarrel continues, it appears that his replacement, the former vice president of Tesla's legal council, Jonathan Chang, has his first interesting days at his new job.
Alex Davies contributed to the reports.
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