Billionaire Elon Musk fired back at the Securities and Exchange Commission’s February 2019 contempt filing designed to muzzle the Tesla CEO’s Twitter commentary.
In a fiery response filed March 22 in New York federal court, Musk slammed the SEC for its “radical reinterpretation” of a September 2018 consent decree under which he agreed to get approval from Tesla’s board before tweeting anything that could impact TSLA’s stock price.
“The SEC’s Reply makes clear that its effort to hold Musk in contempt relies on a radical reinterpretation of the Order that would impose sweeping restrictions to which Musk never consented.”
“The SEC’s position is wrong at virtually every level.”
In his latest court filing, Musk said he did not violate the consent order when he sent an early-morning tweet in February concerning Tesla’s 2019 production estimate.
Musk pointed out that the data he tweeted was already public information. In addition, he clarified his tweet hours later to ensure there was no confusion.
This is the tweet that enraged the SEC:
Specifically, Musk insists that his tweet did not meet the SEC’s requirements for pre-approval because it was posted when the stock market was closed, and did not impact Tesla’s stock price.
Therefore, Musk’s attorneys argued that the SEC is overreacting and overreaching in its attempts to muzzle the billionaire mogul.
“Musk’s belief that the 7:15 tweet did not require pre-approval was correct.”
“Every hallmark of immateriality is present: The tweet restated previously-disclosed information, used generalized terms, was aspirational and optimistic, and caused no reaction in after-hours trading.”
“Nowhere does the Policy require that all communications on the listed subjects be submitted for pre-approval — regardless of their significance or context.”
This disturbing Twitter image of Elon Musk with Elizabeth Holmes’ eyes perfectly encapsulates this messy SEC feud.
As a CEO, Musk says he understands that he needs to exercise caution about things he posts on social media. However, he insists that the SEC’s “overbroad interpretation” would “raise serious Constitutional concerns,” such as restricting his free-speech rights.
Moreover, Musk notes that his use of Twitter is an important part of Tesla’s marketing and consumer-outreach efforts.
“The SEC’s proffered interpretation of the Order would not only gag “false or misleading” speech; it would gag any Tesla-related speech.”
“Musk’s ability to engage with customers about Tesla products is critical to Tesla’s success.”
As CCN.com reported, Musk has been under heavy fire for his tweets. Two weeks ago, an Ohio-based shareholder filed a lawsuit against Musk and Tesla’s entire board of directors, claiming his tweets have hurt the car company.
Musk has not responded to the shareholder lawsuit, but says the Securities and Exchange Commission filed its contempt motion as petty revenge because he criticized them.
In a December 2018 interview with 60 Minutes, Musk quipped: “I do not respect the SEC.” (video below).
The case is U.S. Securities and Exchange Commission v. Elon Musk, 18-cv-08865, U.S. District Court, Southern District of New York.