After weeks of negotiations, Tesla and Elon Musk still haven’t reached an agreement with the Securities and Exchange Commission on a revised settlement deal and have asked for a second deadline extension from a U.S. District Court judge in Manhattan.
Essentially at issue is Musk’s freewheeling use of Twitter. It got him in trouble with the SEC when he used it to proclaim he had the funding in place to take Tesla private at $420 a share, sending the stock soaring. However, he didn’t have the funding secured, and the agency pounced.
Ultimately, the two sides reached deal, fining both Tesla and Musk $20 million each, forcing him to give up his job as chairman and putting a limit on his use of social media — and it’s the last item that is causing the problem.
U.S. District Court Judge Alison Nathan told the two sides to put on their “reasonable pants” and ordered Musk and the SEC to try to resolve the dispute on their own. The parties have already requested one extension and were supposed to be ready to meet with Nathan on April 30.
(Judge tells Tesla CEO Musk and SEC to work it out. Click Here for the story.)
In February, the SEC sought to have Musk found in contempt the settlement after he tweeted details about Tesla production numbers. He sent the tweet without having Tesla attorneys sign off on it. 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.
(Click Here for more about Tesla suffering a massive first quarter sales drop.)
While it seems like a resolution should be pretty straightforward, 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.
(To see more about Musk lamenting “excruciating” pressures at Tesla, Click Here.)
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.