Musk's Model Y Debut Leads to Tesla's Worst Post-Party Rout

Cornelia Mascio
Marzo 19, 2019

Chief Executive Elon Musk has never sought pre-approval for a single tweet about Tesla Inc since striking a court-approved deal about how to communicate important information about the electric vehicle maker, the top USA securities regulator told a judge on Monday.

The Securities and Exchange Commission is doubling down on the government's demand to find the Tesla CEO in contempt of a previous fraud settlement that required him to have the company pre-approve any tweets that could materially impact the automaker.

"Musk failed to seek pre-approval of any of his Tesla-related tweets, from the time Tesla implemented its Court-ordered Policy until the SEC filed this motion". The agency said Musk's argument that tweeting about vehicle production forecasts wasn't material information "borders on the ridiculous".

The SEC said in Monday's filing that the pre-approval policy agreed in the settlement was created to include a wide variety of his comments, not just those that were deemed material by the regulator's standards.

"Submitting his written statements for pre-approval does not, as Musk baldly asserts, mean that he is prohibited from speaking", it reads. Tesla and Musk each had to pay $20 million in fines and agree to governance changes that included Musk's removal as chairman. "As long as a statement submitted for pre-approval is not false or misleading, Tesla would presumably approve its publication without prior restraint on Musk", they wrote. Also, Musk has regularly published tweets with "substantive information" about the company and its business, the SEC contended.

Musk called the regulator the "Shortseller Enrichment Commission" on Twitter after the settlement, and tweeted that "something is broken with SEC oversight" just one day after the agency started pursuing the contempt order.

Monday's filing said the February 19 tweet was different from prior public disclosures by the company. Musk corrected the tweet about Tesla vehicle production hours after he sent it.

The tweet was posted and corrected after US markets had closed, but experts say regulators don't care much about that because stocks are traded almost around the clock.

Tesla Inc. shares plunged 5 percent Friday, the worst rout for the stock following one of Chief Executive Officer Elon Musk's parties to hype a new product or service.

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