Elon Musk and SEC Reach Settlement Over Twitter Stand-Off

Elon Musk and the US Securities and Exchange Commission appear to have reached a settlement over the Tesla CEO’s tweeting.
John Loeffler

Elon Musk and the US Securities and Exchange Commission appear to have reached a settlement on the Tesla CEO’s Twitter use that Musk sees as his free expression but the SEC sees as market manipulation.

Elon Musk and Securities and Exchange Commission Reach Settlement

According to a new report from CNN, the US Securities and Exchange Commission (SEC) has reached a settlement with Tesla CEO Elon Musk and Tesla that places enumerated restrictions on Musk’s tweeting about specific company information, but does not push for further sanction.


The deal has yet to be approved by the judge overseeing the case, Judge Alison Nathan, but given that earlier this month she instructed both sides to "put [their] reasonableness pants on” and reach a settlement, there doesn’t appear to be any reason why the settlement wouldn’t be approved.

Musk claimed going into negotiations that his right to free expression was being smothered by an overly harsh regulator, while the SEC has expressed concern over how Musk’s off-the-cuff executive style and active social media presence can have an effect tantamount to market manipulation.

The original settlement made last year between the two sides was broader than what is being announced tonight in that it required Musk to run any tweet with information “material” to the internal business workings of Tesla by a team of lawyers for pre-approval before it could be sent out. Though Musk agreed to these terms, almost immediately afterward, he put on a public show of contempt for the regulatory body and he apparently never ran a single tweet by the company’s lawyers as the original settlement called for.

The new settlement strikes a much more moderate position from both sides in that specific topics are explicitly off-limits without prior approval from an “experienced securities lawyer,” but are not as overly broad as information “material” to Tesla’s operations. Topics Musk must get pre-approval for include information about Tesla’s finances, both potential and proposed mergers, production numbers, sales figures, delivery numbers, new or potential products or services, any nonpublic regulatory or legal findings or decisions, and any topic where pre-approval would be in the best interests of the shareholders.

The last provision sounds like the earlier “material” information restriction, only in this settlement, it isn’t the SEC who decides whether some unenumerated topic needs to be pre-approved, but Tesla’s board of Directors who are empowered to add new items to the list that they decide is appropriate.

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Contentious Stand-Off with SEC Settled for Now

The new settlement comes after the SEC asked the judge overseeing the case to hold Musk in contempt of court for violating the original settlement when he tweeted out an inaccurate number of vehicles that the company was set to be manufactured in 2019.

In Musk’s original tweet, he said Tesla would make 500,000 cars in 2019, a higher figure that people were expecting from the automaker this year, so would certainly affect the value of Tesla’s stock.

Musk corrected himself several hours later by “clarifying” that what he meant to say was that Tesla would be producing vehicles at an annualized rate of 500,000 for 2019. The actual number of cars set to be produced was actually about 400,000.

This “material” information that Musk inaccurately used prompted the SEC to file a petition with the judge asking that Musk be held in contempt. Musk and his lawyers responded with a filing of their own that accused the SEC of obsessing over Musk because they felt insulted and were out to silence Musk’s free speech rights as revenge.

All of this acrimony ultimately goes back to a tweet he sent out last summer where he claimed he was planning on taking the publicly traded company private at $420 a share and that funding had been secured. Regardless of whether Musk meant it or not, the value of Tesla’s stock soared after the tweet and drew the attention of the SEC.

When it was revealed that Tesla was not going private and that no attempts had even been seriously made to raise the money needed to do so, the SEC filed a complaint against Tesla and Musk, kicking off the entire legal drama.

Good News For Musk, He Gets to Keep His Job


When the SEC first petitioned to have Musk held in contempt, it was a genuine question as to whether Musk had finally taken his unique, carefree style of executive management of Tesla one step too far. Had this not worked out as well for Musk as it has, there was a real possibility that his role as CEO of Tesla might have been in jeopardy. Musk already had to step down as Tesla’s Chairman as a condition of his original settlement with the SEC, forcing him out as CEO as well was definitely within the realm of possibility when news of the SEC petition first dropped.

Responding to their petition with a defense that practically snarled at the SEC and called them authoritarian bullies with sensitive egos certainly wouldn’t endear Musk to any SEC regulator who may have been debating what sanction to seek against Musk had the SEC prevailed. With this new settlement, Musk can lift this cloud of uncertainty hanging over him, at least until he does something else to upset the SEC and focus on the work of his companies. If the settlement sticks this time around, it might be the best news Elon Musk has gotten all year.

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