The US Securities and Exchange Commission wants a federal judge to hold Tesla CEO Elon Musk in contempt for violating a settlement agreement with the agency, after he tweeted an inaccurate statement about his company’s car production last week.
In a tweet last Tuesday, Musk wrote, “Tesla made 0 cars in 2011, but will make around 500k in 2019,” before later correcting himself in a subsequent message. In a filing on Monday in federal court in Manhattan, the SEC argued that the billionaire “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers.” Tesla reached an agreement with the SEC last October in which the company consented “to oversee and pre-approve Musk’s Tesla-related written communications” with material information to shareholders.
Monday’s filing is the latest legal salvo in the ongoing battle between the SEC and Musk, who has not hidden his contempt for the nation’s securities regulator since drawing its ire last summer. Last August, Musk tweeted that he was considering taking Tesla private at a price of $420 a share, sending the stock shooting up, despite the fact that Musk had no viable funding source in place to secure such a deal. The SEC then investigated, leading to an initial settlement, which Musk agreed to and then pulled out of, causing the agency to sue the company and its mercurial founder.
Musk and Tesla eventually settled in the fall, paying a collective $40 million to the SEC. Musk agreed to step down as chair, and the company also agreed to appoint two new independent board members and an independent chairperson. The SEC required Tesla to “put in place additional controls and procedures to oversee Musk’s communications,” something it is now alleging the company did not do, in light of the billionaire’s tweet last week.
The SEC declined to comment beyond the filing. A Tesla spokesperson did not immediately return a request for comment.
“Musk has admitted that he did not seek pre-approval of his 7:15 tweet, as required by the Court’s Final Judgment and Tesla’s Policy,” read the SEC’s Monday motion. “Instead, Musk has claimed that he did not believe that he needed to seek and obtain pre-approval for his 7:15 tweet because he thought he was simply recapitulating information that had already been pre-approved” for the company’s earnings call in January.
Musk’s tweet was potentially misleading because it suggested that the company would make 500,000 Model 3 cars this year, conflicting with earlier reports from the company that it would deliver more than 350,000 of those vehicles in 2019. In a subsequent post a few hours later, Musk corrected himself: “Meant to say annualized production rate at end of 2019 probably around 500k, ie [sic] 10k cars/week. Deliveries for year still estimated to be about 400k.”
The SEC’s filing asked the Manhattan court to order Musk and Tesla to show cause as to why the technology executive did not violate their October agreement with the agency. If a judge does find that Musk did violate its settlement, it could potentially open him and his company to further investigation and penalties.
The day after Musk’s tweet about car production, Tesla announced the departure of general counsel Dane Butswinkas, who had been at the company for two months. It’s unclear what the exact reason was for Butswinkas’ departure.
In its motion, the SEC also included part of a transcript from Musk’s appearance on 60 Minutes in December in which he said “I do not respect the SEC.” He previously called the government body the “Shortseller Enrichment Commission.”
Tesla shares fell more than 4% in after-hours trading on Monday following news of the SEC’s filing. Shortly after the publication of the filing Musk tweeted a meme, in which he called himself “Elon Dusk,” and made no reference to the allegations. He then replied to a series of tweets from followers stating that the SEC did not pay attention to statements he made to analysts in an earnings call earlier this year in which he said the company would “maybe” ship 350,000 to 500,000 Model 3’s.
“I have great respect for judges,” he wrote in a subsequent reply. “It’s not perfect, but, in general, we should be very glad of the US justice system.”