Elon Musk and the SEC resolve dispute over the Tesla’s CEO’s tweets

Fredrick Soto
April 29, 2019

Musk lawyers claim that the February tweet did not contain information that is important to investors and that the defendant does not need prior approval for all Tesla tweets within the established rules.

Tesla's $1.8 billion junk bond sank half a cent to yield 8.42%, more than 3 percentage points above the bond's coupon rate of 5.3%.

Among those topics: Any information about Tesla's financial condition; potential or proposed mergers; production numbers or sales or delivery numbers; and new or proposed business lines.

"It could really have turned out far worse for him", said Stephen Diamond, a professor of securities law at Santa Clara University. With this new settlement, Musk can lift this cloud of uncertainty hanging over him, at least until he does something else to upset the SEC and focus on the work of his companies.

Tesla has struggled with logistics difficulties in delivering its Model 3 to global customers, a declining share price and lingering questions about the sustainability of demand.

On Wednesday, Tesla posted a worse-than-expected loss of $702 million for the March quarter. But, Mr. Musk said Tesla would return to profit in Q-3 and that there is "some merit" to raising capital.

But Musk really got into trouble in August 2018, when out of the blue, he tweeted that was considering taking Tesla private and that he had secured funding to do so. The SEC said that the tweet violated federal securities laws and eventually the two parties settled. Musk's privatization plan was at best in an early stage and financing was not in place.

The agency contended that Mr Musk had not sought the lawyer's approval for a single tweet.

It marks a ceasefire in Musk's protracted spat with the commission which was triggered by the Tesla founder's casual Twitter use.

The new agreement unveiled Friday addresses that ambiguity by listing what kinds of statements must be vetted.

That agreement, made public today by the SEC, adds greater clarity to the restrictions on Mr Musk's communications, on Twitter or elsewhere.

Musk's original deal with the SEC was announced last September.

In the early morning of February 26, after the regulator filed its contempt motion, Musk tweeted: "Something is broken with SEC oversight".

Under the terms of the settlement of that fraud case, Musk and Tesla each paid a $20 million fine, Musk agreed to surrender his title as chairman, and he agreed to have tweets about Tesla reviewed in advance by a company overseer.

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