US Financial Regulatory Agency Says Elon Musk Violated Deal
US stock regulators have accused Elon Musk of violating a court-endorsed deal between the electric automaker and the regulatory agency, and this latest apparent slip by the tech wunderkind could cost him dearly.
The action by the powerful Securities and Exchange Commission, with which Musk appears to be doing battle, does not really come as a surprise.
On February 19, he tweeted that Tesla would make 500,000 cars in 2019 — up from the 400,000 that the company had estimated until then, as it grapples with production problems with the Model 3. In his latest display of seemingly erratic behavior, Musk corrected himself four hours later.
He said Tesla would indeed produce about 400,000 cars this year. “Meant to say annualized production rate at end of 2019 probably around 500k,” he wrote. The SEC said the tweets violated a deal under which his tweets had to be reviewed prior to being published.
SEC seeks contempt charge against Tesla's Musk, says tweet violates deal https://t.co/Ftkkq0XoSV #technology pic.twitter.com/xW50LemGL9
— Aleks Kins (@aleks_kins) February 26, 2019
That constraint followed Musk’s now famous tweet last year about planning to take the company private, a claim which proved unfounded but rattled markets.
On “February 19, 2019, Musk tweeted, ‘Tesla made 0 cars in 2011, but will make around 500k in 2019.’ Musk did not seek or receive pre-approval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people,” the SEC said in court filing in New York federal court. “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,” it said.
Musk took to Twitter to defend himself later Monday, saying the “SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k.” “How embarrassing,” he added. But Musk also spoke of his “great respect for judges.”
His lawyers said in court filings that Musk did not believe he needed authorization to tweet details that he understood to have been previously publicly announced. But the SEC does not consider that defense to be credible and says Musk never intended to follow the agreement.
This case now goes to a judge and a lot is at stake for Musk because US authorities have little patience with repeat offenders, especially in cases that affect US financial markets. Already, Tesla shares were down 3.6 percent after Monday’s stock market close.
The deal with the SEC came about after Musk tweeted last year that he planned to take Tesla private and had the financing to do it. That assertion caused Tesla shares to shoot up but proved false and made investors betting against the company lose millions. Musk is known to loathe so-called short sellers who doubt him, and has been suspected of orchestrating the whole affair to punish them.
To settle fraud charges stemming from the tweet, Musk had to resign as Tesla chairman, both he and the company had to pay a $20 million fine and the SEC demanded that the Tesla board oversee his social media use. But Musk did manage to stay on as CEO with control over day-to-day operations as Tesla tries to boost production of electric cars up to industrial levels.
