- Monday was the deadline the US Securities and Exchange Commission gave Tesla CEO Elon Musk to argue why he did not violate a court order last month when he tweeted an inaccurate statement about the company’s vehicle production.
- The order, a result of a settlement between Musk and the SEC, mandates that Musk seek approval for tweets material to the company.
- Musk on Monday filed his response to the court, arguing that the SEC was seeking to expand on the order with its interpretation and that its interpretation violated his First Amendment right to free speech.
As ordered, Tesla CEO Elon Musk has filed his response to the Securities and Exchange Commission, arguing against the agency’s assertion that he was in contempt of court when he fired off an incorrect tweet about Tesla’s production numbers last month.
In the filing, Musk says that the SEC is attempting to expand on the terms of its settlement from last year by limiting his speech on Twitter and that, in doing so, it seeks to violate his First Amendment rights.
Musk also argues that he has “diligently attempted to comply” with the SEC and that the SEC’s use of Musk’s comments made during a CBS “60 Minutes” interview as proof of his violation reflected a “concerning and unprecedented overreach on the part of the SEC.”
This all goes back to ‘funding secured’
The drama dates back to August, when Musk tweeted that had funding secured to take Tesla private at $US420 a share. He did not.
So in a settlement, the SEC fined him and Tesla $US20 million each, arguing that the false statement illegally manipulated Tesla’s stock. As part of that settlement, Musk was ordered to run any tweets containing material statements about Tesla through a Tesla Twitter czar, of sorts.
Last month, however, Musk tweeted that Tesla would make 500,000 cars in 2019 – a figure 25% higher than what Tesla projected in its company filings. Musk, hours later, corrected the tweet, saying he meant Tesla would achieve an annualized production of 500,000 cars between the fourth quarter of 2019 and the second quarter of 2020.
But the damage was done. The day after the tweet, Tesla’s chief lawyer quit, and within a week the SEC had filed a claim saying Musk was in contempt of court. The SEC cited not only the 500,000-car tweet but also an interview Musk did with CBS’ “60 Minutes” in which he criticised the SEC and acknowledged that the Twitter czar was not checking all of his tweets.
He told the interviewer Lesley Stahl that he might “make mistakes.” Mistakes figure heavily into Musk’s rebuttal to the SEC, as do his First Amendment rights and the idea that the agency is trying to retaliate against him.
“The SEC’s primary evidence that Musk has not been diligent in his efforts to comply with the Order consists of excerpts from an interview he gave to 60 Minutes,” Musk’s response said, adding: “During the interview, and consistent with his First Amendment rights, Musk was sharply critical of the SEC. The SEC’s heavy reliance on this interview in its motion for contempt smacks of retaliation and censorship.”
Musk argued that his tweet about manufacturing 500,000 cars was not material to Tesla and thus did not merit an examination by the Twitter czar.
“Musk was rightfully proud of the work he and his team had done to get Tesla from a point where it produced no cars to a point where it would be producing hundreds of thousands of vehicles,” Musk’s filing argued. “Under no fair reading of the materiality standard did Musk’s proud and optimistic restatement of publicly disclosed information, coming after the market closed, ‘significantly alter’ the total mix of information available to investors.”
In fact, it said Musk’s tweet actually represented his diligence in following the SEC’s order since he talked to his Twitter czar afterward. It said the CEO “reasonably” had decided that the tweet – despite containing a forward-looking projection – did not require preapproval.
The response argued that removing Musk’s ability to use his judgment as to what is material was tantamount to censorship and expanded on the SEC’s initial order, turning it into an “unconstitutional power grab.”
“In addition to running afoul of the First Amendment, seizure by the SEC of power to censor speech even when that speech does not violate the laws the SEC is empowered to enforce would implicate separation-of-powers concerns,” Musk’s defence said.
The response also argues that Musk’s tweet was, more or less, in line with statements he’d made before – though previous statements, like one from Tesla’s fourth-quarter investor update, made it clear from the outset that Musk was talking about annualized production.
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