Tesla founder Elon Musk says a February tweet that riled the Securities and Exchange Commission didn’t violate the terms of a court settlement with the agency since he merely put a “shorthand gloss” on information the electric carmaker had previously given to investors.
The tweet, which said Tesla would build 500,000 cars this year, was “celebratory and forward-looking, a type of statement that courts have concluded is immaterial,” attorneys for the 47-year-old billionaire said in papers filed in U.S. District Court in Manhattan on Monday.
The Feb. 20 post was clarified later the same day to show that the company would actually deliver only 400,000 vehicles, though its “annualized production” rate would reach Musk’s first figure, the SEC said in court filings in late February seeking a contempt order against the CEO.
Musk also failed to have the post reviewed by the Palo Alto, Calif.-based company’s securities counsel, as required under a 2018 settlement, the SEC added.
Unfazed, Musk had pushed back on Twitter even before Monday, arguing that the SEC “forgot to read Tesla’s earnings transcript, which clearly states 350,000 to 500,000,” a reference to production figures for its midsize Model 3. Musk gave the numbers on a Jan. 30 call with analysts and investors regarding the carmaker’s financial performance last year.
[Opinion: Elon Musk’s antics put Tesla at risk]
Exactly. This has now happened several times. Something is broken with SEC oversight.
— Elon Tusk ? (@elonmusk) February 26, 2019
Under no fair reading of securities law did the “proud and optimistic restatement of publicly disclosed information, coming after the market closed, ‘significantly alter’ the total mix of information available to investors,” his lawyers wrote in Monday’s filing. “Musk was rightfully proud of the work he and his team had done to get Tesla from a point where it produced no cars to a point where it would be producing hundreds of thousands of vehicles.”
In addition to complaining about Musk’s sales forecast tweet, the SEC had argued a “60 Minutes” interview in December in which he told CBS’s Lesley Stahl that “we might make some mistakes” in carrying out the terms of the settlement showed he isn’t serious about compliance.
“While Musk claims to ‘respect the justice system,'” his deliberate indifference indicates otherwise, the agency said.
Musk, who has previously referred to the agency as the “Shortseller Enrichment Commission,” claiming that its actions have benefited traders betting that Tesla stock would decline, demurred.
Since the settlement, “Musk has dramatically reduced his volume of tweets generally and regarding Tesla in particular,” the attorneys wrote. “This self-censorship is reflective of his commitment to adhering to the order and avoiding unnecessary disputes with the SEC.”
Musk’s 2018 settlement with the agency followed his offer via Twitter in September to take his company private for $420 a share, a substantial premium to its stock price at the time.
The agency said he had failed to obtain financing for that proposal, which was later abandoned, and that it disrupted markets and harmed people who bought the stock hoping to sell at a much higher price based on his comments.
Along with pushing Musk out as chairman in the aftermath, the agency at first sought to remove him as a company officer, too, a move that Wall Street analysts said might prompt investors to back away and lenders to be unwilling to extend credit. It eventually allowed him to remain as CEO, but he and Tesla were each ordered to pay $20 million fines.
