Here we go again.
Tesla CEO Elon Musk has again found himself in hot water with the SEC -- this time, over a tweet that violated the terms of a September 2018 settlement, according to the agency.
That September settlement, along with a $20 million fine and a requirement that Musk step down as Tesla (TSLA) - Get Report board chairman, mandated that Tesla establish oversight over Musk's communications that might contain material information about the company. But on Monday, the SEC filed a motion saying that a tweet sent on Feb. 19 from Musk's Twitter account showed that the oversight provision isn't adhered to within the company.
The offending tweet by Musk said that Tesla "will make around 500k [cars] in 2019." A few hours later, that was followed by a correction stating that it was likely to produce around 400,000 cars this year, with Musk clarifying that he "meant to say annualized production rate at end of 2019 probably around 500k; i.e., 10k cars/week."
Days later, the SEC filed a motion in U.S. District Court requesting that the court hold Musk in civil contempt for violating the terms of the September settlement, arguing that the correction proves that Musk didn't seek approval before publishing the Feb. 19 tweet.
"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 motion read.
On Tuesday, analysts weighed in on what the additional legal headache means for Tesla, which is also dealing with multiple challenges including ramping up European deliveries, a China factory and increasing competition in the EV market. It's also down one high-powered general counsel, with seasoned trial attorney Dane Butswinkas resigning as general counsel last week after just two months.
"We are skeptical that Tesla can prove oversight, particularly given that its new general counsel resigned last week just hours after the social media posts in question, and we believe Musk is likely to be subject to additional penalties which could include any number of measures," wrote CFRA's Garrett Nelson.
Tesla's stock didn't need the additional distraction of another SEC fight to underperform, argued Cowen's Jeffrey Osborne.
"While we expect the company's cult-like following will likely not be deterred by the prospect of another battle between Musk and the SEC, which he has previously dubbed 'the Shortseller Enrichment Commission', we continue to see major risks due to the company fundamental valuation, high growth multiple, and cash needs," Osborne wrote.
In the court motion, the SEC referenced a 60 Minutes interview with Musk in which he stated he "does not respect the SEC" and suggested that Robyn Denholm, Tesla's board chair appointed in November 2018 to replace Musk, had no oversight over him.
Now, the question is where the SEC battle goes from here.
Harvey Pitt, former SEC commissioner and now CEO at Kalorama Partners, explained that there are a number of actions the court could take in response to the motion.
Those include slapping a new fine on Musk -- to be paid by him personally, rather than by Tesla -- or a new mandate that Tesla install an independent, court-appointed monitor to review Musk's communications.
"A third possibility is for the court to tear up the settlement and set the matter for trial, with an indication that the court is inclined to grant an order permanently barring Mr. Musk from serving as an officer or director of any public company," Pitt said. "There are countless possibilities, but these are some that might seem more relevant than many of the others."
On Tuesday, US District Court Judge Alison Nathan told Musk that he has until March 11 to explain why he shouldn't be held in contempt.