Elon Musk, SEC agree to guidelines on Twitter useApril 27, 2019
Tesla, Elon Musk and the U.S. Securities and Exchange Commission reached an agreement Friday that will give the CEO freedom to use Twitter —within certain limitations — without fear of being held in contempt for violating an earlier court order.
Musk can tweet as he wishes except when it’s about certain events or financial milestones. In those cases, Musk must seek pre-approval from a securities lawyer, according to the agreement filed with Manhattan federal court.
U.S. District Judge Alison Nathan, the presiding judge on this matter, must still approve the deal. Nathan had given the SEC and Musk two weeks to work out their differences and come to a resolution.
Musk must seek pre-approval if his tweets include:
- any information about the company’s financial condition or guidance, potential or proposed mergers, acquisitions or joint ventures,
- production numbers or sales or delivery number (actual, forecasted, or projected),
- new or proposed business lines that are unrelated to then-existing business lines (presently includes vehicles, transportation, and sustainable energy products);
- projection, forecast, or estimate numbers regarding Tesla’s business that have not been previously published in official company guidance
- events regarding the company’s securities (including Musk’s acquisition or disposition of shares)
- nonpublic legal or regulatory findings or decisions;
- any event requiring the filing of a Form 8-K such as a change in control or a change in the company’s directors; any principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions
The fight between the two parties began after Musk’s now infamous August 7, 2018 tweet that had “funding secured” for a private takeover of the company at $420 per share. The SEC filed a complaint in alleging that Musk had committed securities fraud.
Musk and Tesla settled with the SEC last year without admitting wrongdoing. Tesla agreed to pay a $20 million fine; Musk had to agree to step down as Tesla chairman for a period of at least three years; the company had to appoint two independent directors to the board; and Tesla was also told to put in place a way to monitor Musk’s statements to the public about the company, including via Twitter.
The fight was re-ignited after Musk sent a tweet on February 19 that Tesla would produce “around” 500,000 cars this year, correcting himself hours later to clarify that he meant the company would be producing at an annualized rate of 500,000 vehicles by year end.
The SEC argued that the tweet sent by Musk violated their agreement. Musk has said the tweet was “immaterial” and complied with the settlement.
The SEC had asked the court to hold Musk in contempt for violating a settlement agreement reached last October over Musk’s now infamous “funding secured” tweet. The SEC had argued that Musk was supposed to get approval from Tesla’s board before communicating potentially material information to investors, the agency has argued. The SEC claimed a February 19 tweet violated the agreement.
Musk has steadfastly maintained that he didn’t violate the agreement.