The Securities and Exchange Commission asked a federal judge Monday to hold Tesla founder Elon Musk in contempt, arguing that a Twitter post forecasting the electric carmaker’s 2019 sales violated a settlement late last year.
Not only did Musk fail to get pre-approval for the Feb. 20 post as required under the deal ending an SEC lawsuit, his claim that the Palo Alto, Calif.-based company would build 500,000 cars this year was incorrect, the agency said in court papers filed in U.S. District Court in Manhattan.
About four hours after the initial 7:15 p.m. tweet, Musk clarified that “annualized production” would reach 500,000 vehicles by year’s end but the company would actually deliver about 100,000 fewer vehicles than that. The figures, available to Musk’s more than 24 million Twitter followers as well as anyone else with Internet access, bear heightened relevance to Tesla investors because of the company’s ongoing effort to boost output enough to consistently turn a profit.
Musk’s failure to have the sales-forecast tweet reviewed beforehand and 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 show the 47-year-old billionaire wasn’t serious about compliance, the agency alleged.
“While Musk claims to ‘respect the justice system,'” his deliberate indifference indicates otherwise, the SEC said.
The agency’s settlement, approved by a federal judge, not only required Musk and other executives to obtain pre-approval from a company securities lawyer for any online comments that might influence Tesla’s share price but forced him to give up the role of chairman.
Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.
— Elon Musk (@elonmusk) February 20, 2019
Musk and Tesla were also ordered to pay separate $20 million fines after the SEC accused him of offering on Twitter to take his company private for $420 a share, a substantial premium to its stock price at the time, without obtaining funding.
The proposal, which was later abandoned, disrupted markets and harmed people who bought the stock hoping to sell at a much higher price based on the CEO’s comments, the SEC said.
The agency at first sought to remove Musk 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.
Tesla fell 4.5 percent to $245.85 in after-hours trading in New York. The carmaker’s stock has tumbled 10 percent so far this year.
