Elon Musk has a unique love-hate relationship with Twitter.
The Tesla CEO seems to love the micro-blogging platform, despite having courted controversy and trouble thereupon on more than one occasion in the past. Not to mention huge penalties and warnings from the federal regulatory authority, SEC.
Following a series of new, ‘inaccurate’ tweets by the profound entrepreneur, the US Securities and Exchange Commission accused him of having violated last year’s settlement on Monday. The SEC called upon the federal judge to initiate action against him for contempt of court.
Musk And His Twitter (mis)Adventures
It’s not the first time when Musk is staring at the charges levied against him. Last year Elon Musk had invited action from the federal regulatory authority after a series of misleading tweets by him regarding his plans to make the electric car company private. The act, however, did not go well with the SEC.
Musk was brought to the book for unbridled rants across the social platform. As a part of the settlement, Musk and Tesla were both ordained by the SEC to disburse fines of $20 million each for the loss they had caused to the investors because of sending Tesla’s shares tizzying down. Additionally, Tesla agreed to set up a “pre-approval” process for all of its senior executives’ communications with shareholders, including their social media posts.
The agency had refrained from its original plan to divest Musk of his CEO position, keeping in view the investors’ interest, but cost him Chair position at Tesla.
There are dozens of social platforms out there and a common man going ahead to post something silly on one of these hardly affects everyone. But as the CEO of a publicly traded company, Musk is expected to show some discretion before venting out his views on public platforms.
However, there seems to be no holding back Musk.
On February 19, Musk went on to post, “Tesla made 0 cars in 2011, but will make around 500k in 2019” on Twitter. He again chose to speak his mind without seeking the company’s approval, as clearly ordained by the SEC last year, before sending out a tweet which was disseminated to over 24 million people within a short time.
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
Four and a half hours later, he made an attempt to clarify his previous message. The damage however had been done and Tesla shares quickly fell by 5% in extended trade.
Reacting to the new barrage of tweets by Musk, SEC Monday filed a motion in a federal court in Manhattan and accused him of having “violated the court’s final judgment by engaging in the very conduct that the pre-approval provision of the final judgment was designed to prevent.”
The motion also calls upon the federal judge to take action against Musk’s misdemeanours and charge him for violating the settlement.
Reacting to the SEC demand for clarification on the Feb 19 tweet, the lawyer representing Musk and his company explained that the former’s tweet was merely a reaffirmation of the information that had been approved by the company while announcing its financials for the fourth quarter in January this year.
Though not pre-approved as ordained by the SEC, the substance of the tweet had been “appropriately vetted, pre-approved and publicly disseminated,” upheld his lawyer. Besides, the statement had been made outside the market trading hours.
It is not yet clear as to what punitive action Musk could invite upon himself if found guilty of contempt of court.
The nature and quantum of penalty would depend upon the federal judge according to Peter Haveles, a trial lawyer with the law firm Pepper Hamilton.
“If the SEC prevails, there is a good likelihood that the District Court will fine Mr. Musk and that it will put him on a short leash, with a strong warning that further violations could result in Mr. Musk being banned for some period of time as an officer or director of a public company,” he says.
For his latest misadventure, the SEC might take action in any of the following manners:
- The SEC could seek a bar order and direct Tesla to take Musk off the company’s board.
- Musk might be subject to a lesser penalty, like perhaps a monetary fine.
- The regulatory authority might ask the court to reopen the original settlement for renegotiation and, maybe even ask for the original changes to be reinstated.
“It’s a pretty unusual situation,” said Stephen Diamond, a professor of corporate governance at Santa Clara University. “All bets are off.”
While the legal wranglings are going on and lesser mortals like you and I are wondering how dearly his latest volley of tweets could cost him, Musk took to Twitter once again.
SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing … ?
— Elon Musk (@elonmusk) February 26, 2019
Robyn Denholm, who took over as the electric car making company’s chairperson after Musk was asked to step down, has not yet commented on this new set of developments.