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US financial regulator wants Tesla boss Elon Musk held in contempt over tweet

Time 3 years ago

TESLA chief executive Elon Musk’s tweeting habits have triggered another legal challenge from stock market regulators in the US.

Late on Monday it emerged the Securities and Exchange Commission (SEC) asked a federal court in New York to hold Mr Musk in contempt for violating a 40 million-dollar (£30m) settlement he reached with the US stock market’s chief regulatory agency five months ago.

Tesla’s stock dropped about four per cent in after-hours trading on Monday.

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Contempt charges are typically brought against individuals who defy a court order.

The SEC settlement was approved by a judge last autumn, exposing Mr Musk to potential fines or even jail time if he is found to be in contempt.

Elon Musk
Elon Musk agreed to have future tweets pre-approved in a settlement five months ago (PA)

Tesla did not immediately respond to requests for comment about the SEC’s latest move. But letters from the company’s lawyers included in Monday’s filing argue that Mr Musk remains in compliance with the settlement.

The SEC had sued Mr Musk last September for using his Twitter account in August to announce he had secured financing for a potential buyout of Tesla — news that caused the company’s stock to swing wildly.


He later backed off that buyout idea, but regulators concluded he never had lined up the money to pull off the deal that probably would have required at least 25 billion dollars to pull off.

Mr Musk initially contended that he had not done anything wrong before reluctantly agreeing to have future tweets that could affect Tesla’s stock be pre-approved.

Now the SEC is alleging that Musk broke the terms of that agreement with a February 19 tweet projecting that Tesla would make about 500,000 cars this year.

About four-and-a-half hours after that tweet, Mr Musk corrected his statement, saying he meant that Tesla had started to manufacture cars at a weekly clip that would translate into 500,000 cars during yearlong period, but not necessarily for calendar 2019.

Mr Musk acknowledged he did not get company approval for the initial February 19 tweet, according to the SEC, even though car manufacturing statistics can affect stock prices of carmakers.

In his defence, Mr Musk said he did not think his tweet needed clearance because he was basing it on information that had been disclosed in late January.

Both February 19 tweets occurred while the US stock market was closed. Tesla’s stock rose by less than one per cent the next day.

But the SEC illustrated Mr Musk’s allegedly contemptuous behaviour with some of the comments he made during a television interview with 60 Minutes that aired on December 9.

In that interview, Mr Musk revealed that no one at Tesla was screening the tweets he posts to his account, which now has 25 million followers.

When pressed how Tesla officials could know whether his tweets might be violating the SEC settlement if they were not readying them before they were posted, Mr Musk replied: ‘Well, I guess we might make some mistakes. Who knows?’


The SEC also pointed out that during the same interview, Mr Musk declared: ‘I want to be clear. I do not respect the SEC. I do not respect them.’

Tesla’s legal team realised Mr Musk may have crossed a line with his February 19 tweet about car manufacturing, according to the SEC.

After that tweet was posted, a Tesla lawyer ‘immediately arranged to meet with Musk and draft the corrective statement that Musk tweeted out over four hours later’, it added.

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Rebecca Chaplin's avatar

Rebecca has been a motoring and business journalist since 2014, previously writing and presenting for titles such as the Press Association, Auto Express and Car Buyer. She has worked in many roles for Car Dealer Magazine’s publisher Blackball Media including head of editorial.

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