Musk is in contempt of court, screams SEC after Tesla boss brags about car production rates
Regulator says 'inaccurate' claims go against 2018 settlement
Elon Musk should be held in contempt of court, the US Securities and Exchange Commission has told a New York federal court after Tesla's mouthy CEO tweeted about the number of cars the company will roll out this year.
The US watchdog said a tweet about Tesla's plan to make 500,000 cars in 2019 was "inaccurate" and broke the terms of a 2018 agreement that stated Musk's commentary about the car maker would be vetted in advance.
This deal was struck after the SEC slapped Musk down for his trigger-happy Twitter-finger when he mooted taking Tesla private to millions and million of his Twitter devotees.
"Am considering taking Tesla private at $420. Funding secured," the famously short-tempered, weed-puffing exec wrote in September.
In follow-up tweets, he said: "My hope is *all* current investors remain with Tesla even if we're private. Would create special purpose fund enabling anyone to stay with Tesla"; "Shareholders could either to [sic] sell at 420 or hold shares & go private"; and "Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote."
The SEC filed a complaint against Musk for what it said were false and misleading statements, and a month later a settlement was agreed between Musk, Tesla and the SEC.
This included a clause that Musk had to seek Tesla's pre-approval of any written communications, including social media posts, that would be relevant to the company or its shareholders. The agreement also saw Tesla and Musk each pay $20m to the SEC, and the rant-prone boss step down as the Tesla's chairman.
However, the rocket baron appeared not to have learned from the experience, taking to Twitter on 19 February to say: "Tesla made 0 cars in 2011, but will make around 500k in 2019."
About four hours later, a correction popped up: "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."
The SEC said it had investigated and found that Tesla had not vetted the first comment – distributed to Musk's 24 million followers and however many more who saw it retweeted – which it asserted was "inaccurate".
The corrected tweet appeared only after Tesla's so-called designated securities counsel intervened and drafted a clarification for the exec to post.
"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," the SEC said in its filing (PDF).
It added that Musk had said in a letter to SEC staff afterwards that he was "cognizant" of the procedures – so the error wasn't down to a lack of clarity in the terms.
Musk hit back on Twitter (where else?), claiming that he had referred to the 500,000 number in Tesla's 30 January earnings call:
SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing … 🤗— Elon Musk (@elonmusk) February 26, 2019
But the SEC gave this argument short shrift. In the first instance, it said, Tesla's policy is "clear and unambiguous" that re-approval must be sought again for any statement made more than two days after it was initially signed off. In this case, there had been a gap of almost three weeks.
The SEC added that Musk's claim to be restating comments in the call "is not credible" because the information in the two missives was "obviously different".
Indeed, the comments on the earnings call were more specific than the first tweet, and similar to that of the corrected, Tesla-approved tweet:
"Model 3 production volumes in Fremont should gradually continue to grow throughout 2019 and reach a sustained rate of 7,000 units per week by the end of the year. We are planning to continue to produce Model 3 vehicles at maximum production rates throughout 2019.
"Inclusive of Gigafactory Shanghai, where we are initially aiming for 3,000 Model 3 vehicles per week, our goal is to be able to produce 10,000 vehicles per week on a sustained basis. Barring unexpected challenges with Gigafactory Shanghai, we are targeting annualized Model 3 output in excess of 500,000 units sometime between Q4 of 2019 and Q2 of 2020."
The SEC said this means Musk not only failed to comply with the terms, but also that he repeated his previous transgression of tweeting "inaccurate and material information about Tesla" to the world's internet users.
It asked the court to enter an order to show why Musk should not be held in contempt of the court's 2018 judgment. ®