Well, that didn’t last long.
Within days of reaching a settlement with the Securities and Exchange Commission over what it says was “false and misleading” information delivered to investors via Twitter, Tesla founder Elon Musk was back online and taunting the regulator.
Directly quoted (errors and all), he tweeted: “Just want to that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!” The tweet is time-stamped at 4:16 p.m. on Oct. 4.
That comes following an earlier tweet that was nothing more than a link to a music video for one-hit-wonder rappers Naughty By Nature. Read into it what you will.
There is, of course, no rule or law against venting about the Commission (ask Mark Cuban about that from his successful defense of insider trading charges). What should raise an eyebrow, however, is how quickly it took for Musk to seemingly ignore internal controls over his public communications that were now supposed to be in place at Tesla.
Earlier this month, Musk and Tesla reached a settlement with the SEC over the CEO’s claims that he had secured funding to take the company private.
The deal includes a diminished role for Musk (three-year ban as chairman of the Tesla board), safeguards to keep his public-facing commentary in check, and a more independent oversight role for the board of directors. It also calls for a $20 million fine for both Musk and Tesla.
By agreeing to the settlement, Tesla also agreed to demonstrate greater scrutiny of all public-facing communications, including, but not limited to, Musk’s posts on social media, the company’s website, press releases, and investor calls. The settlement demands “pre-approval of any such written communications that contain, or reasonably could contain, information material to the company or its shareholders.”
Initially, for a day or two, Tesla’s board and leadership appeared to be taking the demand seriously.
An Oct. 3 an announcement of third-quarter motor vehicle deliveries and production goals was understandably filed with the SEC in a 10-K form. So was a letter, however, Musk sent to employees to thank them for their hard work, what would normally be non-material motivation. “We will achieve an epic victory beyond all expectations,” he wrote, not a statement of fact, but as encouragement to meet established production quotas.
Blurring the lines a bit, perhaps, was Musk’s promise, internally, that the electric-car maker is “very close to achieving profitability and proving the naysayers wrong.” That one line, alone, probably led to the decision for Tesla to alert the SEC and investors, even if it was unlikely to have raised a red flag in the past. In a vacuum, it might have shown that the promised controls and reviews were working.
Whether Musk will continue to push the envelope with his social media posts, of course, remains to be seen. It is possible, and only he knows for sure, that the recent SEC needling was a last gasp before his settlement actually becomes legally binding.
District Judge Alison Nathan, who still must approve the deal, has given Tesla, Musk, and the SEC one week to submit, in writing, a rationale for why the plan would suitably protect investors and should be approved.