Tesla Inc. (TSLA - Get Report) CEO Elon Musk must explain to a Federal court why he should not be held in contempt for violating an earlier agreement with the Securities and Exchange Commission on his use of social media.
U.S. District Judge Alison Nathan said Musk will need to write to the court by March 11 and plead his case after the SEC said Monday that a Tweet from Musk earlier this month, in which he appeared to reveal material information on Tesla's production schedule, violated a September 2018 settlement that prohibited Musk from sharing company information without vetting from legal counsel.
"Defendant Elon Musk shall submit to this Court by March 11, 2019, briefing to show cause, if any, why he should not be found in contempt of the Court's Final Judgment," Judge Nathan wrote Tuesday.
Tesla shares were marked 1.34% lower by mid-morning Tuesday and changing hands at $294.76 each, a move that would extend the stock's three-month decline to around 15%.
The settlement itself, reached through U.S. District Judge Alison Nathan, was linked to an August 2018 Tweet by Musk over plans to take the clean-energy carmaker private that the SEC said was misleading to investors.
"(Musk has) once again published inaccurate and material information about Tesla to his over 24 million Twitter followers, including members of the press, and made this inaccurate information available to anyone with Internet access," the SEC alleged in papers filed to the Federal court in Manhattan. "Musk has thus violated the court's final judgment by engaging in the very conduct that the pre-approval provision of the final judgment was designed to prevent."
The SEC said it was concerned that a February 19 Tweet, in which Musk said that "Tesla made 0 cars in 2011, but will make around 500k in 2019" before quickly adding "meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k" were not vetted by the company.
Musk appeared unrepentant on social media following the SEC filing, suggesting via Twitter late Monday that he was only sharing information about the company that had been publicly disclosed.
Exactly. This has now happened several times. Something is broken with SEC oversight.— Elon Musk (@elonmusk) February 26, 2019
Musk was forced to relinquish his role as Tesla chairman following the SEC settlement, but told CBS's 60 Minutes program in December that it was "not realistic" to think new chairwoman Robyn Denholm could hold him to account as group CEO. He also said his Twitter account was not being monitored by company executives.
"It's not realistic in the sense that I am the largest shareholder in the company," Musk said when asked if his role in the company he founded would be subject to oversight from Denholm. "I can just call for a shareholder vote and get anything done that I want," adding that ""I want to be clear. I do not respect the SEC."