- Tesla CEO Elon Musk violated the terms of his agreement with the Securities and Exchange Commission, the agency said in a court filing Monday.
- In a tweet last week, Musk said Tesla would produce 500,000 vehicles this year then later corrected himself and said it would only make about 400,000.
- Tesla acknowledged in a letter that Musk’s first production tweet wasn’t preapproved by the company.
- Under the settlement, Tesla is supposed to preapprove all his communications with shareholders that include “material” information about the company.
Elon Musk’s tweets have gotten him in trouble with the Securities and Exchange Commission again.
The SEC is alleging that Tesla’s CEO misled investors with a tweet last week about the company’s expected vehicle production targets. What’s more, the agency is charging that because Musk didn’t get preapproval of the tweet by Tesla, he’s in violation of the terms of a settlement he and the SEC reached last fall, and asked a judge to hold him in contempt of the federal court that approved that settlement.
“Musk did not seek or receive pre-approval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people,” the SEC said in a filing with the US District Court for the Southern District of New York. “Musk has thus 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.”
A Tesla representative did not immediately return an email seeking comment.
On Tuesday afternoon, Musk said on Twitter that Tesla would produce 500,000 cars this year — a number that was far above its previous forecasts. Four hours later, he revised himself, saying that the company actually still estimates it will produce only 400,000 cars this year, but that it expects to be producing them at a 500,000-car rate by the end of the year.
Tesla didn’t preaprove Musk’s tweet
The slip-up seemed problematic, and not just because investors may have traded on the erroneous number Musk gave first. Musk had agreed last fall to have his communications with shareholders — including his tweets — pre-approved by a company lawyer as part of his settlement with the SEC.
In correspondence with the SEC, Bradley Bondi, who represents Tesla as a lawyer for Cahill Gordon & Reindell, acknowledged that Musk hadn’t gotten pre-approval of his first production-related tweet last week, but argued that wasn’t a problem.
“Although the [first] tweet was not individually pre-approved, Mr. Musk believed that the substance had already been appropriately vetted, pre-approved, and publicly disseminated,” Bondi said. “Moreover, the tweet was made outside of NASDAQ trading hours.”
But the SEC was having none of it. The policies Tesla put in place at the agency’s behest as part of last fall’s settlement explicitly require the company to pre-approve all of his communications with shareholders concerning information that’s “material” to the company, the agency said in its filing. Those policies name Musk as a person at the company whose communications need to be preapproved and they state that tweets are among the communications that need preapproval, the agency said.
“The provision of the Court’s Final Judgment requiring Musk to obtain pre- approval before publishing written statements containing material information about Tesla is clear and unambiguous,” the agency said.