Correspondence between the United States Securities and Exchange Commission (SEC) and Tesla that has recently been made public indicates that the SEC informed Tesla that CEO Elon Musk’s tweets about the company’s solar roof production capacity and stock prices in 2019 and 2020 violated a 2018 settlement in which Tesla was required to hire a lawyer to vet Musk’s tweets.
The Wall Street Journal reportedly obtained the correspondence through a Freedom of Information Act (FOIA) request. Elon Musk, Tesla, and the SEC haven’t responded to a request for comment.
The SEC’s 2019 case had been brought before a Manhattan judge, in which the regulatory body asked the court to hold Tesla and Elon Musk in contempt for a tweet. The judge ordered the parties involved to settle the matter. The finalized agreement included more strict definitions of the possible topics of tweets that would require pre-approval by a lawyer. The topics include certain aspects of Tesla’s business, including financial projections, production estimates, sales figures, and new product lines.
The 2020 case involved a tweet that expressed Elon Musk’s opinion that “Tesla’s stock price is too high.” Tesla pushed back against the SEC in that case, saying that Musk was merely stating an opinion and that tweet wasn’t covered by their agreement. Attorney Alex Spiro, a member of Tesla’s outside counsel team, accused the SEC of harassing both Musk and Tesla with endless, overlapping investigations.
“The serial nature of these investigations leaves us gravely concerned that the SEC is targeting Mr. Musk for an improper purpose,” he wrote in a reply to the SEC’s correspondence.
The 2020 case ended with the SEC dropping the case without any negative outcome for Tesla or Musk, though it did send one closing salvo in a politely worded letter:
“We urge the company to reconsider its positions in this matter by acting to implement and enforce disclosure controls and procedures…to prevent further shareholder harm.”
Elon Musk has a long-running contentious relationship with regulators that often includes sharp comments whenever Musk or one of his companies become subjects of an investigation. Tesla and its vehicles and factories have also been the topic of investigations into safety-related issues by the National Transportation Safety Board and Nevada’s Occupational Safety and Health Administration. Musk got especially sharp with the FAA when it investigated the series of high-altitude flight tests of Starship prototypes that ended in fiery explosions.
After the 2018 settlement, in which both he and the company were required to pay $20 million fines and he was required to give up his position as Chairman of Tesla’s Board of Directors, he mocked SEC regulators, calling them the “Shortseller Enrichment Commission.”
One of Tesla’s investors has previously filed a lawsuit alleging that Tesla failed to retain a lawyer who could stand up to Musk. The lawsuit says that the failure to vet his tweets cost investors “billions of dollars in market capitalization.”
Even with Musk’s tweeting, though, Tesla stock did post 740% gains in 2020, which was enough to qualify it for inclusion in the S&P 500 index. Tesla posted its first profitable year in 2020, with nearly 500,000 vehicles delivered.