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Elon Musk Should Be Held In Contempt For Tweet, SEC Tells Judge (fastcompany.com)

Posted by BeauHD on from the now-he's-done-it dept.

The Securities and Exchange Commission has asked a federal judge to hold CEO Elon Musk in contempt for breaking terms of a settlement agreement with a tweet. The SEC cited an "inaccurate" February 19 tweet about production. Musk tweeted alongside a photo: "4000 Tesla cars loading in SF for Europe." He replied to the tweet adding: "Tesla made 0 cars in 2011, but will make around 500k in 2019." Fast Company reports: It's that "will make around 500K in 2019" part that angered the SEC, which had this to say in legal papers filed with a Manhattan federal court: "He once again published inaccurate and material information about Tesla to his over 24 million Twitter followers, including members of the press, and made this inaccurate information available to anyone with Internet access." The SEC says the tweet violated an agreement that was part of a settlement Tesla made with the regulator last year. Musk promised to consult with Tesla's board before he made any statements on social media that could affect the stock price of the company. Tesla also agreed to pay $40 million in penalties and Musk agreed to step down as chairman of the board.

7 of 274 comments (clear)

  1. Fake News by SuperKendall · · Score: 5, Informative

    As Elon pointed out, he gave that figure in the last earnings report way before that tweet....

    Like Musk said - how embarrassing for the FCC! It sure does seem like someone there has it in for Tesla, very likely someone at the FCC is compromised by some large short holder that is sweating bullets.

    --
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    1. Re:Fake News by Rei · · Score: 4, Informative

      Let's be clear on what all of the numbers actually are.

      Q4 letter: 360-400k vehicle deliveries
      Q4 call: 350-500k Model 3s produced
      Tweet: around 500k vehicles produced

      These are not the same thing. Deliveries are not production (there's also inventory, both in-transit and accumulated - both of which are to be much higher this year vs. last, due to the international launch of the Model 3 and Tesla's new policy to locally stock common configs for faster delivery), and Tesla makes more than just the Model 3 (e.g., ~80k S+X this year).

      Yes, there is a lack of clarity between the Q4 letter and call (I wouldn't expect up to 100k M3 inventory, although it's possible) - but resolving that ambiguity is an issue entirely unrelated to the case. What matters is that Musk's tweet clearly falls within the range of publicly disclosed information. Because the earnings call is an official source of public information disclosure.

      There seems to be a common mistaken view (even repeated by some journalists) that the SEC settlement requires anything Musk posts to be pre-read and pre-approved. This is not correct. The social media policy, imposed on Tesla by the settlement, requires Musk to seek approval for communications which contain material information - nothing more.

      So the question is: is reiterating already public numbers from official channels (aka, the Q4 earnings call) "material information"? Yeah, good luck making that argument. That doesn't mean that the numbers from the call will be proven correct - but they were previously publicly disclosed information, and thus not material information. And regardless of whether one thinks that Musk should have every tweet pre-approved, that is not his obligation - he is only required to have tweets containing material information approved.

      Now, let's put yourself in the shoes of a Tesla attorney. And let's say that Musk's statement in the earnings call was not guidance that you wanted repeated (e.g. overly optimistic or whatnot). What do you do? The company has an obligation to make sure that it's putting out are as accurate as possible. So if you only want the 400k figure repeated, then what's the solution? You jointly draft a followup "correction" tweet, of course. This does not in any way change the fact that what was stated previously was already public information.

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    2. Re: Fake News by DarenN · · Score: 4, Informative

      In fairness, they're claiming he broke the agreement, and he disagrees.

      His counterpoint is that the number he tweeted was already available in the earnings report and thus could not move the stock price. This is reasonable - the SEC cannot expect him to not publicize Tesla's successes, and given this was public information for investors already it seems unlikely to move the stock price.

      --
      Rational thought is the only true freedom
    3. Re:Fake News by religionofpeas · · Score: 4, Informative

      350-500k Model 3s vs 500k vehicles

    4. Re: Fake News by c6gunner · · Score: 4, Informative

      Note how it requires him to submit his Tesla related tweets to the agreed review process before publication.

      No, it doesn't. You are lying again. The exact wording is "written communications that reasonably could contain information material to Tesla or it's shareholders". That's nowhere near the same as all Tesla related tweets. Moreover you first suggested that he was completely prohibited from tweeting about Tesla, and now you've changed that to "well he has to have it reviewed first". If you keep changing your claim you will eventually be in the realm of factual commentary, but it would be nice if you would acknowledge that that's what you're doing.

      Tesla appointed someone to review his tweets, and they quit after one day.

      And now you're just repeating bullshit you read from other idiots on here. Who was this mysterious person who quit after one day? There seems to be no record of him. If you're referring to Dane Butswinkas, he left after two months, so you've only underestimated his actual length of employment by a factor of 60 or so.

    5. Re: Fake News by MachineShedFred · · Score: 4, Informative

      From your own link:

      implementation of mandatory procedures to oversee and pre-
      approve Mr. Musk’s Tesla-related written communications that reasonably

      could contain information material to the company or its shareholders,

      He didn't violate the agreement, because what he tweeted on 19 February was already public information released on 30 January during the investor call.

      The tweet contained no "information material to the company or its shareholders" because they already had access to the information. As it turns out, "material information" has a defined meaning. Note the bit about "when it is revealed to the public" - if it's already public, then it's no longer material information.

      You are wrong. You are not a lawyer. You are definitely not a securities lawyer, and neither am I. Don't act like one.

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  2. Re:Shouldn't we wait by ShanghaiBill · · Score: 4, Informative

    Forward projections of material facts issued by corporation directors are required to be issued to all shareholders simultaneously, and to be accompanied by specific legal disclaimers.

    The proper way to release material information is in quarterly reports, or in pre-announced earnings calls.

    Issuing these projections by tweet is never ok. It is especially bad for Elon because he has already been spanked once for this behavior, and had signed a consent decree to not do it again.