According to a new court filing, the SEC has asked a judge to hold Elon Musk in contempt of court for allegedly violating his settlement with the US regulatory body by tweeting out potentially market-moving information.
Musk Tweet About Tesla Production Numbers at Issue
In the tweet that the SEC has taken issue with, Musk said that Tesla “made 0 cars in 2011, but will make around 500k in 2019.”
Tesla made 0 cars in 2011, but will make around 500k in 2019— Elon Musk (@elonmusk) February 20, 2019
The terms of his settlement require Musk to get explicit approval from Tesla for any tweets that might contain potentially market-moving information. According to the SEC complaint, Musk failed to do so and proceeded to tweet out inaccurate information to his millions of followers.
Potential Trouble for Musk
The terms of the settlement with the SEC allowed Musk to remain CEO of the Tesla after he tweeted back in 2018 that he had secured funding to take Tesla private at $420 a share, which he had not done.
Shareholders could either to sell at 420 or hold shares & go private— Elon Musk (@elonmusk) August 7, 2018
Should the judge accede to the SEC’s demand and find Musk in contempt, he might receive a much stiffer penalty than the $20 million fine he was forced to pay as part of his settlement, which allowed him to avoid admitting guilt to an offense.
As part of the settlement, the SEC demanded Tesla maintain control over Musk’s communications when they contained information about the company that might have an impact on the company’s share price. Musk issued a correction to the offending tweet hours after he posted the original, this apparently didn't mollify the SEC.
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
The SEC settlement allowed Musk to remain the CEO of Tesla as part of the deal, but a contempt ruling against Musk might throw the settlement into doubt, putting his role as Tesla's CEO going forward at risk once again. Shares in the electric vehicle manufacturer fell 4% in after-hours trading after the filing was made public.