According to an exclusive report by The Wall Street Journal, the SEC accused Tesla and SpaceX CEO, Elon Musk, of ignoring a court-ordered policy in 2019 and 2020 regarding his use of Twitter.
“Securities regulators told Tesla Inc. last year that Chief Executive Elon Musk’s use of Twitter had twice violated a court-ordered policy requiring his tweets to be preapproved by company lawyers,” wrote The Wall Street Journal. “Tesla and the Securities and Exchange Commission settled an enforcement action in 2018 alleging that Mr. Musk had committed fraud by tweeting about a potential buyout of his company. Mr. Musk paid $20 million to settle that case — Tesla also paid $20 million — and agreed to have his public statements on social media overseen by Tesla lawyers.”
According to correspondence sent to Tesla in 2019 and 2020, as described by the Journal, “the SEC said tweets Mr. Musk wrote about Tesla’s solar roof production volumes and its stock price hadn’t undergone the required preapproval by Tesla’s lawyers.”
The SEC also accused Tesla in May 2020 of having failed “to enforce these procedures and controls despite repeated violations by Mr. Musk,” and said that the company “has abdicated the duties required of it by the court’s order.”
These actions are the latest in a challenging and contentious feud between Tesla and the SEC. After accusing Musk of violating these rules in February 2019, it was agreed that the policy would be modified by establishing a list of topics Musk cannot “communicate without preapproval.”
“The list is long but includes many subjects that are typically considered material to investors. He would need preapproval to tweet about a range of topics related to Tesla’s business, such as sales figures, financial projections and new product lines,” the Journal reported at the time.
Then, in July 2019, the SEC contacted Tesla again regarding Musk’s tweet, “Spooling up production line rapidly. Hoping to manufacture ~1000 solar roofs/week by end of this year.”
Spooling up production line rapidly. Hoping to manufacture ~1000 solar roofs/week by end of this year.
— Elon Musk (@elonmusk) July 30, 2019
Another letter from the SEC came in May 2020 after Musk tweeted, “Tesla’s stock price is too high imo.”
Tesla stock price is too high imo
— Elon Musk (@elonmusk) May 1, 2020
“In the face of Mr. Musk’s repeated refusals to submit his covered written communications on Twitter to Tesla for pre-approval, we are very concerned by Tesla’s repeated determinations that there have been no policy violations because of purported carve-outs,” the SEC wrote at the time.
As the BBC reported, Musk said he had “no respect” for the SEC, but agreed to the settlement fine “because he believed in the justice system.” Musk even publicly mocked the SEC in July 2020, tweeting, “SEC, three letter acronym, middle word is Elon’s.”
SEC, three letter acronym, middle word is Elon’s
— Elon Musk (@elonmusk) July 2, 2020
As CNBC noted, “Shareholder lawsuits against Tesla and Musk, including the case Gharrity v Musk et al, have also pointed to the CEO’s Tweets, and said they caused shareholders and the company financial harm.”
The U.S. Securities and Exchange Commission (SEC) was created following the Wall Street Crash of 1929, and is an independent agency of the federal government responsible for enforcing laws regarding market manipulation.