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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.

28 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.

    --
    "There is more worth loving than we have strength to love." - Brian Jay Stanley
    1. Re:Fake News by 110010001000 · · Score: 3, Insightful

      Why would a short be sweating bullets? The stock is down 15% over the last 12 months. You Musk cultists are something else. Jobs died and you had to find another "hero" I guess. You guys need to find better heros.

    2. Re:Fake News by _merlin · · Score: 5, Interesting

      You're confusing options with delta 1 instruments. If someone was betting that the stock price would collapse, the easiest way to make a profit on it (i.e. requiring least initial outlay, margin and maintenance) is to buy a put option. You do that, and if the price falls below the strike price you make some money. If it doesn't fall below the strike price, you just lose the premium you paid for the option. No need to sweat bullets - you've already paid, you're not up for any other losses.

      Now if you want to post a bit more margin, you can write a call option. In this case, you're paid the premium, and if the stock ends above the strike price, you pay the difference. In this case you want to hope that the premium you got when you wrote the option is going to be bigger than the difference between the stock price and the strike price at expiry. But if you're writing options without delta hedging, you're basically gambling, so if you lose you got what was coming to you.

      If you want a short delta 1 instrument, the lowest initial outlay is a contract for differences (CFD). With this you get a delta 1 position, but you pay maintenance each month. The stock price needs to fall at rate faster than the maintenance you're paying on your CFD position. You're not going to be shitting bricks in this case either. You've been paying the whole time you've had your position open, and if the stock price isn't falling fast enough you just swallow the loss so far and close the position.

      Actual short stock positions require an arrangement with a security lender if you want to hold them for more than a day. The lender is going to charge you maintenance on the position and require you to post margin. So as with the CFD, you'd cut your losses at some point if the stock price isn't falling as fast as you'd like.

      I'm not going to try and give an overview of futures here, but as with the other delta 1 strategies there's no strike price involved. The only people who'd be shitting bricks would be people who wrote deep in-the-money calls and didn't hedge their positions. But they should've known what they were getting into.

    3. Re:Fake News by No+Longer+an+AC · · Score: 5, Insightful

      I think Steve Jobs was an asshole, but I also consider him a hero and more importantly a genius.

      And I think Elon Musk is an idiot, but he's also a genius...and a hero. Okay, maybe not a hero, but I'm jealous of his success and I really do wish I had a Tesla and also a rocket that could launch me to Mars.

      I'll get a Tesla sooner or later. As soon as the transmission falls out of my 20 year old Detroit garbage which the "Check Engine" light tells me is due to happen any mile now.

      I do keep hearing horror stories about Teslas, but most of them sound overblown and I've been hearing horror stories about cars all my life. Did you ever hear the one about the Pinto?

      I only say Musk is an idiot because he sometimes blurts out stupid stuff that he probably wouldn't say if he weren't so stoned (kind of like me). All the problems with Tesla...quality control, production numbers, whatever...those are all expected from a relatively new car manufacturer and when was the last time a new car manufacturer ramped up to the level of Ford or GM?

      Tesla still has a long way to go, but when Ford recalls nearly 2 million vehicles.... I dunno...I guess when Ford recalls 2 million vehicles I'm glad I drive a Chrysler.

      So Ford just recalled 1.8 million vehicles which nearly equals their annual production of 1.9 million vehicles. Holy shit! Can you imagine the bad press that would ensue if Tesla had to do that? But with Ford, hardly anyone blinks an eye.

    4. Re:Fake News by No+Longer+an+AC · · Score: 3, Funny

      DAMMIT!

      I wanted to make some snarky comments and I accidentally hit submit before I was done!

      From the link in my previous post:

      a transmission flaw that could cause the vehicles to downshift to first gear with no warning.

      Fortunately I drive a Chrysler so it's like I'm always in first gear anyway.

      Also impacted— by separate issues—were select Lincoln Continentals made between 2017 and

      Did Fortune REALLY say "impacted" when referring to certain car models?

      This is how words like "phrasing" come into common speech. At least my car hasn't been impacted.

    5. 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.

      --
      When was the last time you ran anywhere? I mean with your own legs, not by pressing 'X'?
    6. Re:Fake News by AmiMoJo · · Score: 4, Insightful

      Q4 call: 350-500k Model 3s produced

      That's the problem right there. Between 350k and 500k. Musk tweeted that they will produce 500k. He forgot the range.

      Omitting the range suggests that Tesla is on target to produce 500k. Musk is not supposed to make statements like that any more, or at least not without prior review and approval.

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
    7. Re:Fake News by AmiMoJo · · Score: 3, Insightful

      What boggles the mind is that Musk just can't resist tweeting about Tesla production numbers even after he was told by a court not to and fined $40 million.

      How hard is it to just avoid tweeting about that stuff?

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
    8. Re: Fake News by AmiMoJo · · Score: 2

      Do you know why they are saying it's "contempt of court" now? It's because the court signed off on the agreement, on the basis that Musk would stick to it, and if he didn't he would be held in contempt by the court for not obeying its instructions.

      See, the SEC isn't dumb. They made sure that the agreement had legal force by having the court agree it, creating this consequence if Musk ignored it.

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
    9. 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
    10. Re:Fake News by religionofpeas · · Score: 4, Informative

      350-500k Model 3s vs 500k vehicles

    11. Re: Fake News by Rei · · Score: 2

      That's not what was said during the call. What was said was:

      Colin Rusch

      Thanks so much. Can you talk a little bit about the geographic dispersion for the guidance for 2019, where you're expecting the Model 3s to sell through as well as the other models?

      Elon Musk

      Well, I think we did, actually. Yes, it's clear in our letter.

      Deepak Ahuja

      We indicated in Q1, we will start delivering Model 3s in Europe and China. And we also shared a chart showing the potential market size for midsized premium sedans in North America, Europe and Asia, suggesting those markets could be even bigger. So I think that gives a good sense of where we'll be. And we'll launch the right-hand drive version at some point to go to the other markets.

      Elon Musk

      Yes. Maybe in the order of 350,000 to 500,000 Model 3s, something like that this year.

      Absolutely nothing whatsoever about these being annualized figures. Specifically "this year". And only about Model 3s, not counting S+X.

      Again, those numbers might be wrong, but they were public guidance given in an official context. Indeed, Musk's tweet was so non-market moving (premarket) that the last trade of TSLA before Musk's tweet was $307,10, and the average price of all trades after it up until the "correction" was $307,24. Effectively no budge whatsoever. Volume was light as well compared to pre-tweet.

      --
      When was the last time you ran anywhere? I mean with your own legs, not by pressing 'X'?
    12. Re:Fake News by Solandri · · Score: 2

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

      The fact that the figure he tweeted had previously been disclosed is irrelevant. The SEC's argument isn't that he published new undisclosed information outside of the regular financial statements. They're saying that he broke the terms of his settlement, where he agreed not to publish anything written (including tweets) without first getting them approved (though I'm unclear on who exactly is supposed to do the approving). He could've tweeted something as benign as "Tesla went public in 2010" and if he didn't first get it approved, it still would've been a violation.

      In other words, they're saying that if he had been in compliance, whoever at Tesla was supposed to be doing the approving would've noticed the error in the "500,000" figure, and corrected it to "350k to 500k" to match the earnings report before it was tweeted to the public. And thus his followup tweet (clarifying that 500k was the expected end-of-year rate not the end of year total) shouldn't have been necessary. They're saying the fact that a correction tweet was necessary is evidence that he's shooting tweets from the hip again, instead of first getting them approved like he's supposed to be doing.

      The SEC is actually trying to do him a favor by trying to get him to stop his drunken midnight tweets.

    13. Re: Fake News by AmiMoJo · · Score: 2

      Here's the settlement letter he signed along with the SEC and submitted to the court: https://drive.google.com/file/...

      Note how it says he won't tweet anything about Tesla without having it put through the review process first.

      Since Tesla failed to implement the review process, he shouldn't be tweeting abut Tesla at all, even if it is 100% true and accurate.

      Doesn't matter if it influenced anyone, or if it was public information or not. He agreed not to do it and settled for only $40 million. He broke the terms of the settlement, there in black and white.

      --
      const int one = 65536; (Silvermoon, Texture.cs)
      SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
    14. 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.

    15. Re: Fake News by Rei · · Score: 2

      And the market disagrees with the SEC. Don't look now, but Tesla is actually up. In what world does the market think that the SEC has a plausible case against a company and actually go up after the SEC takes the CEO to court? And this is against negative macros!

      --
      When was the last time you ran anywhere? I mean with your own legs, not by pressing 'X'?
    16. 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.

      --
      Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
    17. Re:Fake News by MachineShedFred · · Score: 2

      Totally false. 100% FUD.

      Do you know anything about cars, at all? What is magical about a Tesla that would cause 100% of any recalled vehicle to have to go back to the Fremont factory, but any other car manufacturer could do it at a dealership service center? You know that Tesla has service centers, right? Moreover, they have on-site service vans that can take care of lots of service appointments at your convenience wherever the car is, so you don't have to go to a service center. If the recall is on a part that is easily swapped at a service center, or by their on-site service crews (does Ford have that?) then why would it have to go back to the factory?

      Here's a hint: my Model 3 needed to have the turn signal stalk replaced because it wasn't auto-cancelling on a left turn. A guy in a van showed up and replaced it in my driveway in about 20 minutes. I regarded this as excellent customer service I would have never gotten from any other car manufacturer I've bought a new vehicle from in my life, including FCA, Subaru, BMW, Volkswagen, Honda, Toyota, and Jaguar Land Rover.

      Why are you lying on the internet, bro?

      --
      Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
  2. Re:Shouldn't we wait by 110010001000 · · Score: 4, Insightful

    It has nothing to do with the tweet being "wrong" or "right". The settlement is that his Tweets need to be approved, and they aren't.

  3. Re:world's smartest idiot by SirAstral · · Score: 2

    This is true of everyone, there is no one that will harm you more than yourself. Humans excel at self sabotage and contradictory behavior. You tell someone it's not a good idea to walk off a cliff... wham... lined up like lemmings. You tell them tats are a bad idea... they get covered head to toe, you tell them that you don't agree with their religion they hate you, you tell them that you don't agree with their conclusions about science they hate you, you tell them you don't agree with their politics they hate you... and then they turn around and ask why everyone hates everyone and that all the hate needs to stop... while never stopping their own hate.

  4. Re:Shouldn't we wait by slashdice · · Score: 3, Interesting

    Yes, the SEC knows for certain he didn't "consult with the board." Look man, last week the SEC sent Tesla's lawyers a letter asking if that tweet had been pre-approved. Their response was, "uhh, no.". It was worse than that! They made it clear that nobody looks at tweets until after they're sent. SEC asked for a list of all tweets that had been pre-approved. They got back a blank sheet of paper. Tesla hired a well known, well respected securities lawyer to babysit Musk's twitter account. HE QUIT THE NEXT DAY. Probably filed a whistle blower claim so he can collect 10% of the fine, too.

    --
    Copyright (c) 1990 - 2014 Dice. All rights reserved. Use of this comment is subject to certain Terms and Conditions.
  5. Re:Musk saving the world by NicknameUnavailable · · Score: 3, Insightful

    Or he's another Silicon Valley hack out for world domination who has a bunch of friends and a mentality that he can get away with anything because he's rich. The regulations in place work to keep every other American down (you'd experience similar if you started a company making wild claims,) what's wrong with them applying to him?

  6. It was inevitable... by mark-t · · Score: 2, Interesting

    It was obvious to me from the outset that the conditions of the settlement effectively place a gag order on Musk that forbids him from mentioning virtually anything about Tesla, since almost anything he might publicly say could affect stock prices.

    If I were him, I'd quit. Sell off his shares of the company to the highest bidder and get as far the hell away as possible from such a blatantly oppressive work environment that only seems to want to ruin the guy. He made his fortune once.... he's a smart guy, he can do it again somewhere else.

    --
    File under 'M' for 'Manic ranting'
    1. Re:It was inevitable... by Jeremi · · Score: 4, Insightful

      If I were him, I'd be more careful what I post on Twitter. In fact, I wouldn't post to Twitter at all. There, problem solved.

      --


      I don't care if it's 90,000 hectares. That lake was not my doing.
  7. 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.
     

  8. This is bullshit. by bistromath007 · · Score: 2, Insightful

    Even if what Musk is doing is somehow unethical, it's bullshit. The SEC goes ripshit on him for puffing himself up on Twitter, but never says boo about normal everyday fuckery that is far worse. This is the agency that gives a dumb smile and a thumbs-up through every fraud-driven speculation bubble, every stock manipulation, and every business destruction by buyout and offloading of debt, all of which the news just makes up dumb garbage to explain. (For example, your gas prices pretty much never go up because of an actual supply problem, and Sears didn't implode because of Amazon.) The institutional gangsters of high finance are pulling this shit 24/7, and they're never at risk of more than a wrist slap because the next job they're most likely to have is a position at the SEC. They go after Musk because he had the audacity to make companies that disrupted some of their favorite scam factories. Fuck them.

  9. What you should get out of this article: by ZenShadow · · Score: 4, Insightful

    We should all be far more concerned that people are basing financial decisions on something posted on Twitter of all places.

    --
    -- sigs cause cancer.
  10. Re:Shouldn't we wait by CanadianMacFan · · Score: 2

    From the report:
    "we are targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020"

    His tweet talks about 2019 which is different. The report says 500k rate over a 9 month period while Elon said they would actually build around 500k cars in 2019.