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Tesla's Elon Musk, US SEC Get Another Week to Work Out Deal on Twitter Use

Tesla's Elon Musk, US SEC Get Another Week to Work Out Deal on Twitter Use

By Reuters | Updated: 19 April 2019 12:25 IST

Tesla Chief Executive Elon Musk and the US Securities and Exchange Commission will get another week to settle a dispute over Musk's use of Twitter, a federal judge ruled Thursday.

US District Judge Alison Nathan in Manhattan extended the deadline by one week to April 25, in response to a Thursday court filing where both sides requested the extension and said "discussions are ongoing."

Nathan had been asked to hold Musk in contempt over a February 19 tweet that the SEC said violated an earlier settlement with the agency.

If Musk and the agency fail to resolve the dispute, the judge said she would rule on the contempt request.

The SEC sued Musk last year after he tweeted on August 7 that he had "funding secured" to take Tesla private at $420 (roughly Rs. 29,000) per share. The agency said the tweet, which sent Tesla's share price up as much as 13.3 percent, violated securities laws. Musk's privatisation plan was at best in an early stage and financing was not in place.

Musk settled the lawsuit, agreeing to step down as chairman and have the company's lawyers pre-approve written communications with material information about the company, including tweets.

In February, the SEC accused Musk of violating that settlement by sending a tweet about Tesla's production that had not been vetted by the company's attorneys, and asked U.S. District Judge Alison Nathan in Manhattan to hold him in contempt.

Musk's lawyers have argued that the tweet did not contain new information that was material to investors, and that Musk did not need pre-approval for all tweets about Tesla under the settlement.

At an April 4 hearing, a lawyer for the SEC said that if Musk were found in contempt, the agency would ask the judge to require him to submit regular reports about his Twitter use, and to pay a series of progressively higher fines for any future violations.

Nathan declined to rule on the contempt motion at the hearing, instead ordering Musk and Tesla to meet and try to resolve the dispute on their own.

Musk is worth $20.7 billion, according to Forbes magazine. He has been chief executive of Tesla since 2008 and has more than 25 million followers on Twitter.

The Palo Alto, California-based company built its reputation on luxury cars, but has faced several production challenges with its Model 3 sedan, which it hopes will reach a mass audience.

The Feb. 19 tweet that prompted the SEC's contempt motion said: "Tesla made 0 cars in 2011, but will make around 500k in 2019," meaning 500,000 vehicles.

Four hours later, Musk corrected himself, saying annualised production would be "probably around" 500,000 by year end, with full-year deliveries totalling about 400,000.

The SEC said the earlier tweet conflicted with Tesla's Jan. 30 outlook, when it targeted annualised Model 3 production exceeding 500,000 as soon as the fourth quarter, and projected 360,000 to 400,000 vehicle deliveries this year.

Musk's lawyers have argued that the first tweet did not contain new information that was material to investors, and that Musk did not need pre-approval for all tweets about Tesla under the settlement.

Musk has been an outspoken critic of the SEC throughout his legal dispute with the SEC, which he once dubbed the "Shortseller Enrichment Commission."

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

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