Tesla's Elon Musk if facing contempt charges over some tweets about the Tesla's production plans.
Tesla CEO Elon Musk’s fondness for tweeting has already caused him serious problems, from lawsuits to the loss of his job as the automaker’s chairman, but he now faces the possibility a federal court could hold him in contempt for violating a settlement reached last year over his claims Tesla was getting ready to go private.
The Securities and Exchange Commission claims Musk violated the $40 million agreement the two sides agreed to last September that led to Musk relinquishing his post as Tesla chairman and agreement to have his planned tweets reviewed by the company before posting them. Regulators say they are worried that, as was the case last year, Musk could be using social media to mislead investors.
The new allegations come at a challenging time for both Musk and Tesla. The company has now delivered a profit for two consecutive quarters but has warned it faces the prospect of tighter finances for the rest of the year. It is struggling to build sales in China and other overseas markets. And the latest dust-up between Musk and the SEC raises the prospect the South African-born executive could be forced out of his remaining management role.
Considering Musk’s role in not just setting Tesla’s strategy but serving as the face for a company challenging the established automotive order, industry analysts warn his departure could create still further problems for the company.
(Tesla Model S catches fire in Florida, trapped driver dies. Click Here for the story.)
The latest crisis stems from tweets Musk posted last Aug. 7, claiming Tesla was planning to go private, with the stock set to be valued at $420 a share. He subsequently announced that the move was backed by the sovereign Saudi Arabian investment fund. The problem was that there was no deal to back the privatization bid and, it later was revealed, the $420 figure was a joke, a reference to the number, 420, used as slang for marijuana.
The SEC sued Musk in September and the two sides subsequently came to a settlement that included a $40 million penalty, an agreement that Musk would step down as Tesla chairman and a promise that he would have the company review tweets that could influence its stock.
Musk did step down from that post, Tesla replacing him with Robyn Denholm, an Australian telecomm executive.
But he has done little since last autumn to temper his Twitter habit. If anything, he quickly fired off a series of tweets blasting the SEC. In recent weeks, he has continued to discuss Tesla plans that have appeared to directly influence the company’s stock – or so regulators are arguing in court.
In particular, the agency has pointed to a tweet posted on Feb. 19, that said Tesla would produce 500,000 vehicles this year, a significant increase from 2018. That led to a strong market surge. Less than five hours later, however, Musk tweeted again, revising his original statement to indicate Tesla is currently producing cars at a weekly rate that would equal 500,000 vehicles a year, but that it wouldn’t necessarily hit that number in 2019.
(Click Here for details about Musk’s declaration Tesla will have a driverless car by the end of the year.)
If anything, some industry analysts have been raising questions about whether Tesla is receiving enough new orders to even meet the lower production volumes of 2018. The company has been pushing to expand in China and other overseas markets to help boost demand.
Musk acknowledged that he did not get company approval for the original tweet but contended he didn’t have to because it was based on information previously released.
It hasn’t helped that Musk has repeatedly dissed the SEC, not only with tweets posted shortly after the September settlement but also in a December interview on the TV newsmagazine “60 Minutes.” During that broadcast, Musk declared, “I want to be clear. I do not respect the SEC. I do not respect them.”
That comment might have been ignored but for the fact that Musk also confirmed that his Twitter posts were not being screened by Tesla. Asked if that could cause problems, he added, “Well, I guess we might make some mistakes. Who knows?”
(Tesla strongly hints at Q1 loss, facing strong headwinds ahead. Click Here for the story.)
Musk’s latest problems with the SEC sent shares tumbling in after-hours trading. Some analysts worry it could see the 47-year-old executive forced out of a management role, something that could further hurt its stock price and put its corporate strategy in disarray.