Last Friday, Tesla CEO Elon Musk reached a tentative settlement with the Securities and Exchange Commission (SEC) regarding his alleged violation of his September 2018 agreement with the regulatory agency.
Per the agreement, Musk will now have Tesla lawyers review his tweets concerning virtually every aspect of the carmaker’s business. Consequently, the executive won’t be able to tweet about the company’s financials, ownership status, production estimates, sales, credit status, or private SEC filings. The revised deal also requires Musk to screen tweets regarding topics the firm’s board might want pre-approved.
The SEC’s settlement with the billionaire won’t go through until it’s approved by U.S. District Court Judge Alison Nathan.
The SEC-Musk War
Musk’s problems with the SEC began in August of last year. The SpaceX founder tweeted out that he had secured funding to take Tesla private at $420 per share. His announcement caused the company’s stock to rise and the SEC to launch an investigation into his claims. Ultimately, the regulator found Musk’s remarks were facetious in nature and filed suit against him last September.
The SEC’s complaint was resolved quickly but with substantial personal and professional cost to Musk. Tesla and its CEO paid fines of $20 million each and the 48-year-old was removed as the firm’s chairman. For most corporate leaders, a stern and costly rebuke from a government regulator would prompt caution in future tweets. However, Elon Musk is not a typical executive.
In February, the PayPal co-founder raised the SEC’s ire by tweeting his company would produce 500,000 Model 3s in 2019. His pronouncement clashed with Tesla’s official guidance of 360,000 to 400,000 sedans and Musk later tweeted out a correction. But the agency wasn’t satisfied and asked the court to find the inventor in contempt.
The outspoken executive responded to the SEC’s claims by arguing that his tweets didn’t violate the agreement because they didn’t have a material impact on Tesla. Furthermore, he alleged the SEC was making an “unconstitutional power grab” by asking him to stop tweeting about his firm.
Judge Nathan denied the SEC’s request and told both parties to return to court with their “reasonableness pants on.”
Tesla’s Disappointing 2019
After ending 2018 on a relatively high note, Tesla has encountered a number of problems in the New Year. Earlier this month, Tesla ended its recent hot streak with a disappointing first quarter report. Once again, the company’s production and logistics issues kept it from meeting its financial forecasts.
The electric vehicle manufacturer has also had to deal with increased scrutiny regarding its products. In late March, a Chinese security firm revealed it’s unnervingly easy to trick a self-driving Tesla to turn into oncoming traffic. Additionally, a Model S made international headlines after inexplicably combusting in a Chinese carpark.
Then there’s problems Musk himself has made for his car company. Last week, the inventor audaciously claimed that Tesla found a way to make the best semiconductors in the world after ending its partnership with Nvidia. In response, the chipmaker noted that not only were its components better than Musk’s, but also Tesla’s were made by Samsung.
If the organization is to turn its 2019 around, three things will need to happen. The firm will need to hit its production, sales, and delivery goals and its cars will have to stop exploding or malfunctioning. Moreover, Elon will need to refrain from pledging to give every Tesla a flying car update.
Smart money says the firm goes two for three.