Elon Musk says the Securities and Exchange Commission is "virtually wrong at every level" for trying to convict him after he allegedly violated the Settlement Agreement, both sides of the past Year closed. That claim was part of the new arguments Musk and his lawyers had put forward on Friday between the Tesla CEO and the federal agency.
The SEC asked a federal judge on February 25 to disparage Musk because the agency claimed that one of the tweets of the Tesla CEO on February 19 may have violated the language in the settlement. In the tweet in question, Musk said Tesla will produce "around 500,000" cars in 201
The agreement was reached in September last year after SEC Musk sued for securities fraud over tweets he sued for in August for Tesla privatization. Musk said at the time that he had "secured the funding" to get the move through, but the SEC's own investigations showed it was wrong. As a result, Musk was forced as Tesla chairman and had to pay a fine of 20 million US dollars.
That's not all. Musk agreed to overlook his public communications about Tesla – including his tweets. In particular, Musk should provide "prior approval of such written communications which may or may reasonably contain informational material for the Company or its shareholders", as set out in the Settlement. In other words, if Musk is about to tweet something that might affect Tesla's stock price (and its stockholders), it should first run it from an in-house lawyer.
This specific part of the scheme is the background of current dispute. Musk argued again today that the language of the settlement leaves him the freedom to determine whether or not his tweets about Tesla matter. Just as Musk's team reads the terms of the settlement, there is an "obligation for the executive to make a first, bona fide decision as to whether a particular tweet requires prior approval."
The SEC has a much stricter strategy of interpretation of the settlement and believes that Musk takes a too free stance. After initially claiming the February 19 tweet was a breach, the commission noted last Monday that "Musk's uncontrolled and misleading tweets about Tesla triggered the SEC's charges," and the pre-clearance requirement should protect Musk Going's reckless behavior , "
Today's filing shows, however, that the controversy over what could actually tweet Musk seems to have receded. The SEC has indicted Musk for fraud involving securities. Musk's lawyers dropped emails and drafts of the original agreement into Friday's submission, which Musk reportedly rejected. The documents indicate that the SEC originally wanted Musk's public statements about Tesla – including tweets – to be approved before they were released, whether or not they were material to the company's share price and shareholders.
This became a "sticking point in the negotiations," musk lawyers said Friday. They write, as they explained to the SEC at the time, that "Musk's ability to connect with customers through Tesla products is critical to Tesla's success, and that Musk would not agree to a broad prior approval of Tesla-related statements . "
Musk ultimately rejected the initial agreement, which also called for a two-year ban on chairmen and a fine of $ 10 million. The SEC quickly filed a lawsuit against him requesting a ban on all officers or directors. Two days later, Musk opted for tougher conditions, but with a new language about the approval of his tweets.
Musk has also argued that the tweet of February 19 was not material to Tesla's share price for some reasons. He said the figure for the production of 500,000 cars was consistent with a statement he made on January 30 in a call to investors. That's true, although he has offered other estimates since 2019. Tesla has not responded to repeated requests regarding the number is correct. He also said the 19 February tweet was "upbeat and optimistic" and did not change the company's stock price since it was released after trading closed that day. The SEC claimed that this was a "post-hoc rationalization".
Last week, the judge announced that both sides had time until March 26 to ask the court for a hearing on the issue of contempt. The SEC refused last Monday and believed that its case was being brought forward. The lawyers at Musk have apparently not asked in one way or another. We have asked for clarification and will update this post when we hear that.