Back in September of 2018, Elon Musk sent out a tweet saying he was considering taking Tesla private. In that tweet, Musk also falsely asserted that he’d already secured the funding such a move required.
That one tweet cost him a world of legal headache, his position as Tesla’s chairman, and a $20 million fine.
Then last month, Musk did it again with a sudden tweet expressing Tesla would “make around 500k” cars throughout 2019. Four hours later, he then changed the statement saying that, technically, car deliveries would end up being closer to 400k.
But the damage was done either way, as Musk had once again tweeted about Tesla’s business performance without requesting approval. As a result, Tesla and the Security Exchange Commission (SEC) are clashing further over the legal extent of Musk’s tweeting rights.
The Defense of Elon Musk
New arguments in favor of Musk were released on Friday by the Tesla CEO’s legal team. They claim the SEC is out of line in declaring February’s tweets as warranting pre-approval.
The argument states that the order previously placed upon Musk was to “comply with all mandatory procedures implemented by Tesla…regarding…the pre-approval of any such written communications that contain, or reasonably could contain, information material to the Company or its shareholders.”
It then declares that “Tesla’s policy does not make any Tesla-related tweet per se material” and that the question in this case is “whether Musk complied with Tesla’s Policy, not whether the SEC is satisfied with Tesla’s Policy.”
Essentially, this implies if a tweet from Musk about Tesla doesn’t affect company stock prices and shareholders, it’s fair game. Unlike the unarguably damaging tweets of 2018, Musk’s lawyers claim that the February incident does not constitute such a violation.
The SEC side of the Story
The SEC has shown that it believes Musk’s tweets to be problematic, and his defenses as post-hoc rationalizations.
In their words, “Musk’s unchecked and misleading tweets about Tesla are what precipitated the SEC’s charges, and the pre-approval requirement was designed to protect against reckless conduct by Musk going forward.”
In fact, the SEC originally wanted all public communications from Musk to require pre-approval. But Tesla challenged those terms, believing Musk’s interactions with customers are vital to their success.
Settling the Case between the SEC and Musk
As it stands, the judge ruling in this case gave both sides until March 26th to request a hearing.
Musk’s lawyers have not said whether they intend to ask for one or not as of yet. Meanwhile, the SEC has openly turned down their opportunity. It is evident the agency expects the arguments they’ve already submitted to be more than enough.
However, nothing is certain for Musk until the ruling ultimately comes to a close.