Bangkok Desk.- Elon Musk reached a deal Friday with U.S. regulators that would eliminate the risk of him being held in contempt for allegedly violating an earlier court order over his use of Twitter, Dow Jones Newswires reported in an article provided to Efe.
The feud stems from a Securities and Exchange Commission investigation in 2018 that alleged the chief executive of Tesla Inc. misled investors by tweeting about a potential buyout of his company. Mr. Musk paid $20 million to settle that case and agreed to have his statements overseen by Tesla lawyers. The SEC then alleged he violated the pact in February by tweeting about company production figures without the necessary preapprovals.
Mr. Musk and the SEC on Friday agreed to modify the original order by clarifying a list of events or financial milestones that Mr. Musk couldn’t communicate without preapproval, according to a filing in Manhattan federal court.
The list is long but includes many subjects that are typically considered material to investors. He would need preapproval to tweet about a range of topics related to Tesla’s business, such as sales figures, financial projections and new product lines. The list also includes production estimates, the topic of the Feb. 19 tweet that put him in conflict again with the SEC.
The outcome is a win for Mr. Musk in that he wouldn’t face the possibility of new financial penalties for statements that violate the order, as the SEC was seeking. However, he still would be restricted in what he can say about Tesla affairs without supervision from lawyers.
«It’s easier for Musk to comply with and it’s easier for the SEC to enforce, because the list has much greater certainty to it,» said Andrew Vollmer, a law professor at the University of Virginia who was previously deputy general counsel of the SEC.
Tesla’s stock rose about 1.3% in after-hours trading to $238.14. Shares fell about 5% in the regular session ahead of news of the settlement deal.
U.S. District Judge Alison Nathan still needs to approve the deal for it to take effect. Judge Nathan said at a hearing this month that she was surprised the SEC had rushed back to court to have Mr. Musk held in contempt, rather than «working it out» with him.
Judge Nathan also said she worried the language in the original order was too vague to enforce, and ordered Mr. Musk and the SEC to negotiate «absolute clarity moving forward so we are not back here again.»
Under the deal proposed Friday, Tesla’s independent directors could dictate other topics that they would want Mr. Musk to refrain from tweeting about without preapproval, the filing says.
At a hearing this month on their contempt case, SEC lawyers argued for stricter discipline to be imposed on Mr. Musk and complained that Tesla had failed to supervise him.
The SEC asked that Mr. Musk regularly list his tweets to the court and disclose whether he’d sought preapproval for each one. The agency also asked the judge to consider «a series of escalating fines» in case he breached the policy in the future. Those sanctions now appear to be off the table.
The contempt fight hung over Tesla as the auto maker struggled recently to deliver its Model 3 sedan overseas for the first time. This week, the company recorded one of its worst quarterly losses ever. Its shares are down more than 20% this year.
Tesla’s first-quarter performance underscored that its strategic and financial challenges probably outstrip its worries about regulators. Mr. Musk on Wednesday signaled he may be open to raising capital after rebuffing the idea for the past year.
Mr. Musk is a prolific tweeter whose use of social media has both raised Tesla’s profile and infuriated some of his shareholders.
This week on Twitter, he jabbed at a supplier’s technical capabilities, touted Tesla’s driverless-car ambitions and – the day before the company disclosed first-quarter results – replied to a tweet from Pornhub, the adult website, about developing a «quiet, electric leafblower.»
The February tweet that landed him back in trouble with the SEC said Tesla would produce 500,000 cars in 2019. The SEC said the statement was material to investors and that Tesla hadn’t disclosed the information before. That meant Tesla’s lawyers should have preapproved it before Mr. Musk tweeted, the SEC argued.
Mr. Musk countered that his tweet simply repeated projections that Tesla had already disclosed in January.
The original order said Mr. Musk needed preapproval for any statements that «contain, or reasonably could contain, information material to Tesla or its stockholders.» That language would be removed if Judge Nathan agrees to the settlement.
The agreement does include many of the topics already detailed in Tesla’s communication policy for Mr. Musk that was implemented in December as part of the original agreement. Both, for example, say the CEO must seek preapproval of written communications about the «company’s financial condition, statements or results including earnings or guidance.»
Mr. Musk has been sparring with the SEC since he tweeted in August that he might take Tesla private and had «funding secured» for the deal. After the SEC investigated the statement and found no support for it, Mr. Musk agreed to pay a $20 million fine and relinquish his chairman title. He also agreed to the policy of having company officials oversee and preapprove certain tweets.
The Twitter oversight represented a novel punishment in an SEC case. The agency’s enforcement cases usually involve fines and sometimes even result in defendants being kicked out of a regulated industry. But it is rare for the SEC to seek to force companies to undertake detailed corporate-governance changes, such as overseeing how an executive uses social media.