SEC Asks Manhattan Federal Court to Hold Elon Musk in Contempt
wsj.com
wsj.com
I admire Elon for his vision, and actually also admire his radical style despite of its unpopular image - I watched the video where he smoked pot on the radio show. It was a really amazing conversation about future of humanity. He just needs to stop tweeting. You may say it’s fixing the symptom, but here if we take Twitter away, he would stop yelling stupid FCC punishable things.
As a side note, Twitter has hardly done anything useful for the society. I never got into twitter and never understood its value. Conversations are one sided, blog posts are separated into incomprehensible chain of tweets, people are insulting with no repercussion - it’s a giant echo chamber of loud people. One thing it has done is to improve customer support by shaming companies publicly, which is a really sad state of affairs.
I think even if so, that's a terrible idea.
https://twitter.com/_jameshatfield_/status/11001772987230945...
The point of the SEC is to prevent harms like that. The point of the SEC's 2018 settlement with Elon was to prevent him from investor-harming tweets like the one he made by requiring tweets about Tesla to be reviewed for accuracy and correctness before posting.
Does it matter that it was outside of trading hours?
A lot of people don't realize this is industry-standard. Any reasonable CEO wants to make sure they aren't inadvertently committing securities fraud with the send of a tweet.
Tweets being reviewed by the legal department are par for the course at any publicly-traded company.
Also, the SEC is a regulator for a reason. Saying the company is cool with it (even when it’s really unclear if that’s actually true give the voting setup) is completely irrelevant to if the behavior is acceptable to society. After all, grifters are totally fine with gritting when they’re the ones doing it, but that doesn’t mean grifting a societal benefit.
[0] https://www.thestreet.com/investing/stocks/how-elon-musk-con...
Let's not forget Musk owes a fiduciary duty to Tesla shareholders and his tweets have repeatedly lost shareholders money and induced people to purchase shares on false/misleading information. That's securities fraud.
Source: Corporate & Securities Attorney. I was once the approver of many such tweets. Though thankfully the people I worked with were exceedingly reasonable in comparison to Musk.
Edit: Missed a word.
Said citizen and his company avoided prison time and massive fines respectively by agreeing to said restrictions as the result of earlier fraudulent misrepresentations on a private account he demanded the corporation register as an official public account for regulatory purposes.
So...yes. Definitely they can enforce an agreement he voluntarily entered into for a medium he deliberately turned into a regulated source.
2) I don't see how it's a terrible. Musk is breaking federal laws as CEO and putting the whole company in jeopardy. It's no different than a rogue firstline worker speeding down the road drunk in a company vehicle.
> Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech,
A civil contract between a company and individual does not fall under this at all. They could add anything to that contract and it is up to you whether you sign it. If a company demands you to walk to the office like someone out of Monthy Python's Ministry Of Silly Walks, they sure can. It's up to you whether you accept it. There are some explicit limitations to this (class discrimination, whistleblower protections etc) but beyond that, it's a free country.
Is that just for entertainment or did you use that information in some way?
It's similar to papers or tv stations crowing how they broke a story. So what? Do I really need (or do most people) to know that there is a mass tragedy (only one example) the minute it happens? It can't wait? Not everything that happens is '911' grade information.
"just" is just your opinion
> Do I really need (or do most people) to know
I do.
Reading the entire sentence makes it clear that "just" refers to whether or not they "use that information in some way", and that is not an opinion.
> I do.
You cut off "the minute it happens". It's not about whether you learn it, but how rapidly.
Breaking a story matters if no one else was looking, but yeah not of everyone was racing.
I recently read a group of high profile journalists (mainstream media) stating that "Twitter is where we get the news from"...
Twitter has become a sort of real-time news agency. If you follow the correct profiles in your niche/sector not even Reuters can beat the speed of 95% of the events. If there's a newsworthy event, chances are it's first on twitter than in any other media outlet.
Wow. This is unbelievably scary.
Imho news should be curated & not first to the wires. News should involve individual fact checking and less web of trust.
I understand how we consumers might want to listen to a journalist's feed, but journalists using it as a source too? It's nothing but a self referential feedback loop otherwise!
One word describes the problem: covfefe
https://twitter.com/freakonometrics/status/10205573001537044...
How is that a good thing? Without proper fact-checking it's just rumors. And there are a lot of instances of fake news spreading on Twitter before full information is available.
Press releases still exist. Although even then I'd wager the copy writers do a better job of legal due diligence than Musk.
Going off tangent again, but the same analogy goes with Facebook - it was nice to connect with people and see their updates until it became this rotten, ad driven, divisive tool. Remember FB restricted to college users back in 2005?
Maybe there is some kind of “aging” phenomenon with social networks. They all rot. MySpace, Digg, Reddit, Facebook, Twitter and coming up next - Instagram.
As a micro-publishing platform, it's hard to beat.
There are very few topics that are both worthy of a news story and able to be summarized even remotely well in 140 characters. It is literally the downfall of journalism and in my opinion is a major driver in the complete lack of rational discussion in politics today.
A great example was the learn to code meme.
I am not saying we should ban them. Just disrupt them.
Twitter is a combination of the worst things:
Public shouting
In very short form
Attacks rise to the top
No way to discuss the substance together
No wonder society is overrun by outrage mobs and #hashtag movements.
This is a separate point, but what exactly does Twitter do to provide a direct connection to the masses that the rest of the internet doesn't? The only difference is that Twitter, through some combination of marketing, first mover advantage, addictiveness to the right audience, whatever, happened to what the developed world chose as its social media platform of choice for current events.
That's orthogonal to its actual appropriateness for being such a platform and to its utility to global/national society as a whole.
Twitter only encourages misunderstanding and posts without thought. The character limit is a big driver of this.
If Musk wants to take his company private then he can do whatever he wants, but there is a different set of rules for CEOs of publicly traded companies for a reason.
I recently heard this described as removing context. Which made me facepalm. Obvious, right? (Sorry, I shoulda bookmarked it.)
FWIW, I think every public figure should hire someone to manage their social media presence. As in, doesn't a CEO have more important things to do?
https://www.cnbc.com/2019/02/20/tesla-replaces-general-couns...
Just from an economic line of thought, even a cursory look at Tesla and Elon's history of public statements would make a reasonable investor think "Gee, the CEO talks a lot. Maybe don't read too much into it."
Otherwise you (the investing public) are going to say "well he could have a great factory, or he could be spouting off again, guess I'll keep the money under the mattress."
It would make it very hard to raise money to do big things.
I'd pay for it just to have my wife be able to say "Really? You want to tweet another picture of the cat? No."
Personally I'm amused and ok with famous people facing the consequences of voicing their opinions, and also them getting roasted by normal civilians in public thanks to twitter.
I get that twitter main usage is this, but you can accomplish that with literally any social media/personal website.
What twitter really facilitates is seeing feeds from random people and famous people responses to other (famous or not) people.
In discussing having a N-second window where a user can correct typos, Dorsey brought it down to a tradeoff between real-timeness and correctibility. Essentially he feels that much of Twitter's charm as a platform comes from the fact that updates feel "live", so every delay from tweet source to delivery needs to be given a heavy cost in the cost/benefit analysis.
Adding a delay like that as a feature (especially for a figure notable enough to move the stock market with a tweet) would undermine that message completely, by preventing that figure from engaging with the conversation in real time.
In the event that anything actually happened on twitter, someone was probably being negligent in terms of tendering and governance. It doesn't make sense for a few tweets to be critical, so they probably weren't.
It’s more effective than sitting on hold waiting for a giant company to ignore you.
One reasonable tweet about an issue and usually a customer service rep reaches out.
I tweeted about how a company saved Christmas for our family with a last minute furniture delivery. We were going to take a secondary choice on color for that item to arrive on time.
The CEO of the company got involved and we got the right color on time.
Company is LoveSac and they were great but wouldn’t have even know about the issue without Twitter.
Only if there's a good PR opportunity to be had, which is exactly the case you described.
That’s extreme. Just give the securities lawyer the password. Elon clearly lacks the discipline to work with pre-approval. So have him draft tweets, send them to the lawyer, and then watch them go live. He can read his feed but not write to it.
But on a bigger scheme, it is sad to see this happening while "puffery" is legal and the damage it is causing is far bigger than anything elon's tweets have caused. https://www.youtube.com/watch?v=t0CyBv18A5k
0. This line is in the 2013 8-K filing by Tesla: "For additional information, please follow Elon Musk’s and Tesla’s Twitter accounts: twitter.com/elonmusk and twitter.com/TeslaMotors "
“Capitalism” wasn't named “capitalism” by it's opponents because it protects consumers and leaves capitalists out in the cold.
I can get the news a bazillion different ways. I don't need Twitter for that. But I also enjoy seeing the reaction from the various communities of which I'm a part, from work to the ski club to the people I follow on Twitter or Facebook. Social media is much better when it's social, not broadcast.
Am I in danger of creating my own little bubble this way? Sure, as has always been the case with RL associations as well, and the remedy is the same as well - learn critical thinking, don't rely on any one of them for your information, etc. And even if each of my social-media "avatars" is in a bubble at least it's my bubble, the result of my own conscious curation and not someone else's idea of what bubble I should be stuffed into.
Incidentally, I think we should have referendums (local, national, scotland..) to ban leaders from twitter. Maybe Jack Dorsey could be sold on this.
They have since slowly killed this value, by changing how the timeline is ordered, increased character limit, etc.
Was what he said really that bad? He said:
>Tesla made 0 cars in 2011, but will make around 500k in 2019
And then later corrected himself with:
>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.
This seems like a pretty simple mistake to have made, and I have a tough time assigning malice to it.
I like Elon. A lot. The news machine's constant thirst for scandal surrounding him is a cancer on our society, and it worries me that it then effects people who have the ability to enact their will with force: the judicial system.
edit: and it honestly just seems like an honest mistake. He likely is constantly thinking of ways to improve the weekly output of Tesla, and then expanding that in his head to yearly production numbers.
>Tesla made 0 cars in 2011, but will make around [/be at the correct pace to be making] 500k [a year] in 2019.
Elon Musk is the head of a public corporation, not a random Twitter user.
Seriously why? Do you go around teeeting about potentially sensitive company info? Employees don’t do it, why is Elon doing it?
IMO, if he had said this in an earnings call, or presented it in a way that made it seem "official", then I could get the problem, but it's twitter.
Several of the courts hearing DACA cases upheld the law, in at least one instance solely because of Trump's tweets established a racial motivation rather than a policy motivation for terminating the program.
The Muslim ban was heavily modified after courts repeatedly struck it down based on Trump's anti-Muslim tweets. The final version was designed to address the issues raised in the original rulings. It is limited to countries like Iran and Syria which are openly hostile to the US, and countries like Yemen and Somalia which have contributed a large portion of the membership of terrorist groups like Al Queada and ISIS. Two of the countries were added to that list Venezuela and North Korea) solely because they aren't Muslim. Persons on this list are feasibly national security concerns, which is just enough of a justification to uphold the travel ban on legal grounds.
I dunno, looking on from overseas it’s a bit surreal. Trumps tweets have normalized too, so it’s no news anymore when he tweets something outrageous.
TSLA stated five years ago that Musk's twitter is an official source of information regarding the company.
He specifically agreed to have Tesla legal review all such tweets to make sure he doesn't tweet bad information again, and promptly went and ignored that.
Except by some particularly whiny people looking for an excuse.
As pointed out many times on this thread, Elon had Tesla designate his personal twitter account as an official source of material company information. Ergo, anything he posts to twitter is potentially subject to SEC reporting requirements.
If he didn't want that responsibility tied to his private account, he should have had Tesla create him a Tesla_CEO twitter handle that he could post from instead.
> According to Tesla’s Policy, any edits to a pre-approved Written Communication or even releasing a verbatim pre-approved Written Communication more than two days after it has been pre-approved requires that the pre-approval be reconfirmed. Even if the exact substance of the 7:15 tweet had been pre-approved 20 days before, Musk cannot credibly claim that he thought he was not required to obtain pre-approval again under the plain terms of the Policy. In fact, the written communication in the 7:15 tweet was not pre-approved 20 days earlier or at any time. Musk’s claim that he thought he was simply restating information from the January 30 communications is not credible.
https://www.documentcloud.org/documents/5750664-Show-Cause.h... page 12
The argument is not "this tweet got approved before, so I can edit it however I want". The argument is "the number is already public information, so I can make a new post mentioning it".
That is the problem, in a nutshell: it should have been pre-approved - according to the FCC's interpretation of the settlement agreement.
If he wanted to keep tweet vomitting, he could have decided not to settle with the SEC last year and taken his chances.
Why people get so excited about Musk spewing numbers over Twitter is beyond me, when the responsible course of action is to verify claims against other better vetted sources.
The crowd was eager to hang Elon over “funding secured” despite the entire deal being dependent on shareholder agreement.
The crowd is now eager to hang Elon over a typo.
I think it’s the crowd that needs to delete Twitter, not Elon.
Before you start discussing SEC rules remember these are all people who have been complicit in regulatory capture and they are all by definition the worst people for the job. They stood by while market manipulation was being performed daily through media publishing misleading stories in time to shake up morning trading. The SEC is corrupt to the core.
Yes, that's the "slap-on-the-wrist settlement" for Musk's securities fraud the parent was referring to.
>Why people get so excited about Musk spewing numbers over Twitter is beyond me
Because he is the head of a publicly traded company and spewing those numbers can violate the law.
>The crowd was eager to hang Elon over “funding secured” despite the entire deal being dependent on shareholder agreement.
Yes, that's precisely why his statement was fraud. He said he had funding secured when he didn't. He did this to manipulate the market.
Outside of the Musk cult, these are the laws people in Musk's position need to follow. If anything evidences SEC corruption it's Musk getting that sweetheart settlement for behavior that would land us average Joes in jail.
If you want to talk about cults at least support your argument with evidence.
Who says that no fault was found? Surely not Musk. He didn’t admit or deny the allegations of the complaint. And:
Defendant understands and agrees to comply with the terms of 17 C.F.R. § 202.5(e), which provides in part that it is the Commission’s policy “not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings,” and “a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.” As part of Defendant’s agreement to comply with the terms of Section 202.5(e), Defendant: (i) will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis; (ii) will not make or permit to be made any public statement to the effect that Defendant does not admit the allegations of the complaint, or that this Consent contains no admission of the allegations, without also stating that Defendant does not deny the allegations; ...
https://www.heise.de/downloads/18/2/5/1/1/4/0/4/SEC_Vergleic...
Unfortunately, the baseline for your understanding requires a reasonable amount of intelligence, a reasonable amount of empathy, and a reasonable amount of ability to frame situations in context.
The reality is that, surprisingly enough to people like yourself, the majority of the population does not actually have all three of those abilities. It was something that was unbelievable to me until I was close to something that dealt with public opinion.
You are absolutely correct on your take of the situation. The reality, unfortunately, is that the majority of the population is not capable (not their fault) of understanding the situation at that level.
This is why messaging out of corporations and politicians tends to be so odd. The majority of people are simply not capable of understanding things at your level.
Edit: I would strongly encourage people here to look up the median reading level in the United States. Then find an example text above that reading level(it's around 9th grade) and realize that half of the United States is below that level
>claimed 500k, but actually 400k
That's a 25% increase! Yeah that's bad! He was already warned for using twitter to spread misleading info about the value of his company. He should know better.
You must tell the truth about how much money you make and spend, and report it annually to everyone, so they can make informed decisions about whether to buy or sell it the same as anyone else.
As long as you do, then you are allowed to sell stock. If you don't then you are not allowed to sell stock. The reasoning is obvious. It's too easy to commit fraud if you don't follow these rules. Therefore, you must agree to the rules to trade publicly. The SEC's job is to protect the public from fraud.
And I say all that as a big supporter of Elon generally.
Typically the law tries to at least somewhat take into account intent, like if someone omits something from a filing by accident or in a deliberate attempt to conceal, for example.
Pointing out his statements demonstrates that he's aware of the rules and is choosing not to respect them. That's usually a sign that someone should be on the higher end of the typical punishment range for a given act.
https://assets.documentcloud.org/documents/5750664/Show-Caus...
> According to Tesla’s Policy, any edits to a pre-approved Written Communication or even releasing a verbatim pre-approved Written Communication more than two days after it has been pre-approved requires that the pre-approval be reconfirmed. Even if the exact substance of the 7:15 tweet had been pre-approved 20 days before, Musk cannot credibly claim that he thought he was not required to obtain pre-approval again under the plain terms of the Policy. In fact, the written communication in the 7:15 tweet was not pre-approved 20 days earlier or at any time. Musk’s claim that he thought he was simply restating information from the January 30 communications is not credible.
This is material information, and he misled investors. It's clear cut.
1) 350k-500k cars a year
2) around 400k cars a year
3) around 500k cars a year
The three statements communicate different information and (3) is the best, since unlike (1) and (2) it implies there's a chance that the production numbers can exceed 500k and would certainly be close to 500k in any case. Whereas, with (1) and (2) it probably won't be.
Furthermore, quoting a specific number, even if you have the word "around" before it, implies new information was obtained narrowing down the range given in the earnings call. Giving investors more clarity on how they should invest in Tesla. This makes it material.
If we can accept the information is material, then it's pointless to argue whether it's misleading or false, since that's not what the SEC is arguing about. Musk has to pre-approve material statements (due to his settlement with the SEC) and, according to internal Tesla policy, get that approval at most 2 days before posting them. The earnings call was on January 30, so even if pre-approval was given then (it wasn't) then it would have expired on February 19 when the tweets were made.
The fact that he misled investors (proven by the fact that he issued a correction 4 hours later), just adds extra ammunition to the SECs argument that Musk should have pre-approved his tweet as pre-approval would have caught the factual errors.
Seriously though, read through the court document, except for the bit at the end of page 9 (where they quote a bunch of cases) it's very simple to read and understand: https://www.documentcloud.org/documents/5750664-Show-Cause.h...
Musk should just talk about the tech instead of the numbers though. The SEC are under pressure to bite Tesla for anything it does out of line.
> "Tesla made 0 cars in 2011, but will make around 500k in 2019"
> "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."
The article seems to suggest it was tweets about projected numbers.
Edit:
From the filing:
> "On February 19, 2019, Musk tweeted, “Tesla made 0 cars in 2011, but will make around 500k in 2019.” Musk did not seek or receive pre-approval prior to publishing this tweet, which was inaccurate and disseminated to over 24 million people. 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. "
http://ir.tesla.com/static-files/0b913415-467d-4c0d-be4c-922...
Unless Tesla updates their projections soon, that's probably not a lie.
I was talking about whether "Musk meant the annualized number." is true or a lie.
> The claim is the original post is wrongly saying 500k total for the year and wasn't run past someone else like Musk promised he would for all Tesla related statements.
The agreement was that he would get approval for posts with material information.
If he's citing a number everyone already knows from the public report, then it's not material information. (except in some kind of unreasonably-broad sense that would make "Tesla makes cars." an offending tweet)
So if he says 500k, and he's talking about the annualized number in the previous public report, then there is a strong argument that he doesn't need approval.
If he says 500k and it's not annualized, then it's a new number, and he does need approval.
That depends on whether you consider a misphrasing to be "information".
Harm to investors isn't the criteria for whether this breached the agreement. (And is probably low to zero for a couple tweets outside trading hours.)
So saying "we'll produce 500k cars in 2019" is a lot of new information:
- it's now definitely 2019, not Q2 2020
- it's 500k total, not just "annualized output"
- risk of "unexpected challeges" in Shanghai disappeared.
By itself it looks like new information. But once you consider it's a typical post on twitter, it's quite plausible that it's a botched quotation.
The agreement pertains to posts that "contain, or reasonably could contain, material information". Sounds like it needs [a likelihood of] actual material information to count.
(This is all assuming that "material information" is info that's not already widely publicly distributed. In other words I am assuming that a tweet of "Tesla makes cars." would not violate the agreement.)
(Also, none of this precludes him getting in trouble for a misleading tweet, entirely separately from whether he violated this agreement.)
The production and sales figures of a car maker are always material information, IMO. Under the facts you posit, they would not be non-public or novel information, but they would still be material information.
Even with that, he was not re-communicating previously issued guidance unchanged. Even with that and even if he were, he still needed to get approval prior to doing it.
Well I attempted to address that. Do you think a tweet of "Tesla makes cars." would violate the agreement?
I'm not joking or being rhetorical when I ask that. The answer could be "yes", but in that case I feel like the agreement was written to be intentionally misleading because it should just say "any mention of Tesla".
I would agree that particular statement is so utterly obvious and completely devoid of news content as to not violate the agreement. However a statement that "Tesla is going to begin shipping a new model of car" or "Tesla is going to begin shipping the Tesla truck" or "Tesla is going into the solar business by bailing out my other company" or other statements would be material (and therefore subject to pre-approval).
Note that "Tesla makes cars" is itself materially different from "Tesla expects to ship around 500K cars in 2019" (even before considering that the former is true and the latter is false).
If those are all things that were in a recent public report, I don't see a difference. They're all public information about the company, and they all matter. Anything in the quarterly report should count as fully obvious in a "reasonable investor" context.
> Note that "Tesla makes cars" is itself materially different from "Tesla expects to ship around 500K cars in 2019" (even before considering that the former is true and the latter is false).
How so? If anything, "Tesla makes cars" is vastly more important than their production expectation. Is the different that it's in future tense? That again would only make his tweet less material.
The filing is a very quick and clear read (probably less than 5 minutes to understand the essence of their straightforward case): https://www.documentcloud.org/documents/5750664-Show-Cause.h...
The rules about editing don't matter, because this post wasn't an edit.
But what does "information material to Tesla or its stockholders" actually mean?
If we take it completely literally, then almost any tweet that mentions Tesla would be in violation.
Maybe that's the actual intent. But it doesn't much sense. Why wouldn't the agreement just say that? And he's posted tons of tweets about Tesla, largely referencing news articles, and the SEC didn't say a word about any of them. Did he get approval for every single one of them? I think it's meaningful that the only tweet the SEC complained about was the one that appeared to have new information.
It seems like there's an implication that to be "material" the information has to actually matter to the people that get it. If he cites something that was in a news article, such as the 500k number, then it wouldn't be a problem, because everyone already has it.
And again, it's not an edit, so he can't be breaching the rules about edits. It's either a straightforward release of material information and he's in violation, or it doesn't count as material information and he's off the hook.
I have zero doubt it’s both material and misleading, even though material would have been enough to breach the prior agreement, but the combination of both is unlikely to escape the SEC attention.
I also don’t think this is anywhere near as bad as the summer “Funding Secured” outright fraud. If he’d done them in the opposite order in time, we might not ever be talking about this one and almost surely wouldn’t be getting SEC ire over this one (and obviously couldn’t get a contempt of court charge). With the pattern of facts as alleged, I think he’s well earned a contempt of court charge, and is likely both legally and literally true that he has contempt for the court.
I don't consider lies to be "material information".
So in this case he was quoting public info, and he was misleading.
The agreement only cares about the first half of that sentence, and there are reasonable arguments in either direction about whether a quote of public info violates the agreement.
Then we come to the "misleading" part. Maybe he gets in trouble but I think using the agreement for that is barking up the wrong tree. Also people should expect tweets to have sloppy phrasing.
As one of the terms of his settlement, Musk agreed to comply with procedures implemented by Tesla that would require him to seek pre-approval of any written communications, including social media posts, that contained or reasonably could contain information material to Tesla or its shareholders.
Consistent with the Court’s Tesla Judgment, on December 11, 2018, Tesla adopted a “Senior Executives Communications Policy” (the “Policy”). Written Communications that contain, or reasonably could contain, information material to Tesla or its stockholders must, prior to posting or other publication, be submitted to Tesla’s General Counsel and Disclosure Counsel (or in the event of the General Counsel’s unavailability, Tesla’s Chief Financial Officer and Disclosure Counsel) for pre‐approval. Authorized Executives are not authorized to post or publish Written Communications that contain, or reasonably could contain, information material to Tesla or its stockholders without obtaining pre‐approval. The Policy provides a non-exclusive list of examples of information that may be “material to Tesla or its stockholders,” which includes “projections, forecasts, or estimates regarding Tesla’s business.” Id. at 1-2. Finally, Tesla’s Policy requires that [i]f an Authorized Executive (i) further edits a pre‐approved Written Communication, or (ii) desires to release a Written Communication more than two (2) days, after receipt of written pre‐approval, such Authorized Executive will re‐confirm the pre‐approval in writing in accordance with this Policy prior to release.
Could you make an attempt at arguing the reasonable argument in the other direction?
The tweet may have appeared to have nonpublic information, but it didn't actually have any.
Therefore the tweet didn't need approval.
That's the core of the argument. Is that clear enough? I already tried to explain why I think it's reasonable in previous posts, but I can do it again if you want me to.
I missed that as the thrust of your argument, because even if the information in that tweet was "material but not non-public due to previously approved disclosure", it would fall afoul of the "more than 2-days since approved" and "approved previously but now has edits" restrictions, which still leaves Musk in violation of the policy and therefore the court agreement.
(I also believe that the update of the range from "350k-500k" [previously public] to "around 500k" [in the tweet] to be a material update when given by the CEO of a company and that the SEC will argue that is also the case, but I agree/admit that there's some room for argument on that point.)
Thank you for the topic-centered discussion and I hope you experienced (as I did) this exchange as "disagreeing without being disagreeable".
It's more that the information is "material but not non-public", end of sentence. He's not piggybacking on a previous approval of a post. He's piggybacking on the fact that it's public.
Even if the previous disclosure had been in a post by Musk, I'd argue those rules don't apply to a new post. Those rules are about how approval for a specific post can be revoked, by delaying too long or by editing. They only affect that specific post, not future uses of now-public information.
But the previous disclosure was not such a post. It bypassed the entire tweet approval process. So these secondary rules definitely do not apply.
> (I also believe that the update of the range from "350k-500k" [previously public] to "around 500k" [in the tweet] to be a material update when given by the CEO of a company and that the SEC will argue that is also the case, but I agree/admit that there's some room for argument on that point.)
That's an okay belief. I'm not saying the result is clear-cut, just that Musk has a reasonable argument.
> Thank you for the topic-centered discussion and I hope you experienced (as I did) this exchange as "disagreeing without being disagreeable".
Sure, I'd agree there.
Even there, I think that's covered by "Written Communications that contain, or reasonably could contain, information material to Tesla or its stockholders must, prior to posting or other publication, be submitted to Tesla’s General Counsel and Disclosure Counsel for pre‐approval."
Taking it literally might be the right interpretation. But it also fails to make sense in other ways. Is there an implied "not already public"? It's honestly hard to tell.
That is also incorrect.
The settlement only mandated that Musk get company approval for Tesla-related tweets. It would have been as simple as him sending an email with the proposed tweet to get signoff before blasting it out there. This is actually extremely common and partially for these sorts of reasons.
The SEC asked Tesla if Musk followed the agreement by getting approval for the tweet. He didn't, thus this filing.
This is the unbelievable part.
"We agree to NOT do X, under penalty of law."
[Does X]
"Did you do X?"
"yeah lol"
Firstly, these people work for Tesla. They don't work for Elon Musk.
Hoping it's not just me, but there is no way I'm lying to the cops (corporate cops, criminal cops, federal cops, whatever) to protect my CEO. Especially if I'm directly asked "Did you* do X" (* where "you" means "Tesla CEO"). Double-especially in this case where the "X" is "not Y" and the person doing "Y" actively avoided you making sure they did "not Y".
If it's my job to make sure my Boss doesn't do something illegal, and he actively circumvents my ability to do my job, damn straight I'm rolling over to the Feds.
In Elon Musks' case this should be Tesla (and probably some other court mandated muzzles) and should be on their Twitter clients, and other "designated publication channels" that the ruling covers.
Why? Because remembering to not do things is a restraint that is extremely mentally burdensome and thus difficult to get correct 100% of the time.
Also, this should probably apply to CEOs and other "public figures" as a general practice they work with through their PR and marketing firms.
The fact that twitter and other platforms are closed only makes this innovation more difficult to add to end user clients.
2. They tend to take contempt seriously.
3. Especially if you double down on it.
When you're the CEO of a publicly traded company, getting paid millions in stock comp to run that company, you don't get to use the excuse "it's mentally burdensome". The whole reason they're in that position, getting paid those obscene amounts, is that they're supposed to be able to handle the burden. If they're not able to handle it, they should step aside for someone who can.
I thought Musk spent 120 hrs/wk working and sleeping in the factory, why would he need to be tweeting about production numbers that have yet to be hit?
I have ADHD. I legitimately struggle with impulses.
Here's why I am not on Twitter: I have ADHD. I legitimately struggle with impulses.
In case of Tesla, I think the annualized target production of 500K cars was calculated over 3 quarters (please feel free to correct me).
Tesla designated Musk's twitter account several years ago.
>Tesla Disclosure Channels To Disseminate Information
>Tesla investors and others should note that we announce material information to the public about our company, products and services and other issues through a variety of means, including Tesla’s website, press releases, SEC filings, blogs and social media, in order to achieve broad, non-exclusionary distribution of information to the public. We encourage our investors and others to review the information we make public in the locations below as such information could be deemed to be material information. Please note that this list may be updated from time to time.
>Interested in keeping up with Tesla?
>For more information on Tesla and its products, please visit: teslamotors.com
>For more information for Tesla investors, please visit: ir.teslamotors.com
>For the latest information from Tesla, including press releases and the Tesla blog, please visit: teslamotors.com/press
>For additional information, please follow Elon Musk’s and Tesla’s Twitter accounts: twitter.com/elonmusk and twitter.com/TeslaMotors
But honestly, its not like its that hard to just not tweet about Tesla.
If he's saying he's driving home from the Tesla factory, that isn't material information. Him tweeting that Tesla is going to make 500k vehicles is material information and needs to be vetted by the agreed upon process per the settlement.
The only reason he had to settle in the first place was because he tweeted false, market-moving information via twitter. Maybe Elon should have considered the consequences then.
Why didn’t he just hand over his twitter password to a social media manager and stop tweeting once he lost millions of dollars over the last tweet?
https://www.sec.gov/Archives/edgar/data/1318605/000119312513...
For additional information, please follow Elon Musk’s and Tesla’s Twitter accounts: twitter.com/elonmusk and twitter.com/TeslaMotors
https://twitter.com/_jameshatfield_/status/11001772987230945...
vs.
Crazy guy that bankrupted himself trying to build a rocket company and a car company simultaneously is less than overly cautious about his tweeting and how it could be used in bad faith by a government legal agency in the USA to persecute him.
That exactly what the follow up tweet which was vetted clarifies.
Tweeting that they definitely would hit the high end of that range, i.e., 500k, i.e., almost 142% of the low-end of the range, was a specific statement about Tesla's capabilities intended to narrow the range of the earlier statements in the interview. Ergo, the tweet was material information and it was reasonable for investors to interpret that Tesla would hit 500k by the end of the year, because it was tweeted by the CEO himself. The clarification about it being a pro-rated (i.e., annualized) number was not provided until much later. (And legally that makes all the difference.)
It's the law. That's how it works.
Especially if you agreed to it.
Also, note that the market was closed at the time of the tweet and the second tweet clearing up any possible confusion, thus, having no impact on the stock.
Whether it's new information or not, he was supposed to get approval first.
> Also, note that the market was closed at the time of the tweet and the second tweet clearing up any possible confusion, thus, having no impact on the stock.
Feel free to argue to a judge that the law knocks off overnight.
In any case: the judgement sought by the SEC is for civil contempt for breaking his agreement. It matters that he didn't follow the procedure that he had promised to follow.
> According to Tesla’s Policy, any edits to a pre-approved Written Communication or even releasing a verbatim pre-approved Written Communication more than two days after it has been pre-approved requires that the pre-approval be reconfirmed. Even if the exact substance of the 7:15 tweet had been pre-approved 20 days before, Musk cannot credibly claim that he thought he was not required to obtain pre-approval again under the plain terms of the Policy. In fact, the written communication in the 7:15 tweet was not pre-approved 20 days earlier or at any time. Musk’s claim that he thought he was simply restating information from the January 30 communications is not credible.
https://assets.documentcloud.org/documents/5750664/Show-Caus... 12th PDF page (labeled 9 at bottom of page)