The much-awaited courtroom showdown between Tesla CEO Elon Musk and U.S. Securities and Exchange Commission never materialized as the two sides were told to make nice and work it out in the next two weeks.
Judge Alison Nathan instructed the “combatants” to renegotiate and clarify parts of a 2018 settlement agreement that mandated stricter oversight of Musk’s use of social media, particularly Twitter. The two sides were in court because the SEC believes Musk violated the terms of the deal, which cost Tesla and Musk $40 million, and he should be found in contempt.
“Put your reasonableness pants on,” Nathan told both sides during a hearing in New York on Thursday.
Nathan recommended the two sides get together and refine elements of the settlement, especially how and when Musk’s tweets should be reviewed. Musk attended the hearing, telling reporters afterward that he was “very impressed” with Nathan.
(Tesla suffers massive first quarter sales drop. Click Here for the story.)
The SEC has taken issue with one Musk tweet basically. On Feb. 19, he tweeted that Tesla will make around 500,000 cars in 2019 — an erroneous number. He corrected the tweet not long after to 400,000 units, but that was enough for the SEC.
SEC regulators said Musk “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers,” according to court papers. Musk and Tesla lawyers counter that the information contained it the tweet was already public and that the agency is attempting to stifle his right to free speech.
Musk got into this mess last year when it told his twitter followers that he was thinking about taking company private, buying out shareholders at $420 a share and that he had the funding in place to do so. He did not. Investors shorting the company were furious and the SEC investigated the tweet, which led to the settlement.
(Click Here for details about Tesla suing a former employee for theft.)
However, the terms of the settlement aren’t entirely clear. They call for Tesla’s legal team to review any tweets that could affect the company’s stock price. However, they don’t have a mechanism in place to do that.
In the meantime, Musk has been open about his disdain for the agency, telling CBS newsmagazine 60 Minutes’ Leslie Stahl that he has “no respect” for the SEC. He also implied that he didn’t care about if his tweets violated the settlement.
If Nathan holds Musk in contempt, Musk’s punishments could range from another substantial fine to limits on his twitter usage to removal from the company’s leadership team altogether. She could also void the settlement with the SEC, reopening the agency’s litigation against Musk and Tesla.
(To see more about Musk lamenting “excruciating” pressures at Tesla, Click Here.)