Tesla CEO Elon Musk was sick and tired of pausing before tweeting to consider the potential impact on his company’s stock price. The prominent executive is urging a federal appeals court to make a provision in his 2018 approval order with the U.S. Securities and Exchange Commission (SEC) that requires him to obtain prior approval from Tesla’s attorneys for certain public communications related to Tesla..
Appeal up to a month later a federal judge rejected Musk’s offer to end the SEC’s similar settlement provision.
In the summary, filed Tuesday with the 2nd U.S. Circuit Court of Appeals in Manhattan and reported by ReutersMusk’s lawyers call the mandate a “government-imposed cage,” whose effect is to “suppress and cool Musk’s legitimate word.” They say the provision violates the First Amendment and restricts Musk’s speech on a wide range of topics unrelated to the statements that led to the 2018 SEC lawsuit.
The attorneys also stated that the SEC could not prove that the provision met any compelling government interests and was, therefore, unenforceable.
How did we get here? It all started with a tweet from Musk that boosted Tesla’s stock price, prompting the SEC to step in.
In August 2018, Musk tweeted:
Shares of Tesla jumped more than 6% following that tweet, leading to significant market disruption, according to regulators.
A few weeks later, the SEC filed a complaint alleging securities fraud because, the agency said, the sale was not completed at all and was “subject to multiple contingencies.” according to SEC. Regulators say the claims constitute fraud because they are false and misleading – a increasingly attached to Tesla. Apparently Musk hasn’t spoken to any potential financial partners about the terms or pricing of the deal.
After many words stomped on the spot, trolling on Twitter and claim that the action of the SEC was unreasonableMusk finally settled with the SEC in October 2018. The settlement saw both Musk and Tesla pay $20 million in separate fines. Musk also had to step down as Tesla chairman and agree to a clause that would require an attorney to check some of his tweets and social media communications to ensure there was no further stock market turmoil. .
The tweets continue
In November 2021, Musk asked his Twitter followers if he should sell his 10% stake in Tesla to cover tax bills on stock options. As a result, Tesla stock plummeted. Last year, he sold $16 billion worth of stock, and Another $7 billion in Augustpossibly related to his decision to acquires Twitter for $44 billion.
(Individual, Musk is trying to kill that dealsaid that the company misled him about the number of bot accounts on the platform. Twitter sued Musk to force him to complete the merger at the agreed price. A trial is scheduled for October 17.)
Immediately after the November tweet, The SEC has issued a subpoena to determine if Musk was in compliance with the previous agreement. The agency issued a second subpoena in June of this year asking for governance processes around compliance, according to the regulation. submit. This comes later Tesla announces earnings for the second quarter while revealing that most of their bitcoins were sold off, leaving the company $222 million in digital assets.
In August, a federal judge denied Musk’s attempt to terminate the provision in his 2018 settlement regarding his Tesla-related tweets. Musk’s attorneys at the time argued that the SEC abused the settlement to launch an “endless, boundless investigation” into Musk’s speech and that the consent order was “withdrawn” from Musk through the implementation of economic coercive measures.”
Musk’s net worth is $24.6 billion in 2018.
U.S. District Judge Lewis Liman said at the time that Musk’s argument was unanswered and dismissed the recommendation, taking us to the appeals court.
In Tuesday’s filing, Musk’s lawyers said the SEC needed to be regulated to avoid keeping the executive under “constant threat” that it could refute his position on the disclosure. which needs pre-approval.
“Under the shadow of the consent order, the SEC has increasingly examined, controlled, and attempted to limit Mr. Musk’s protected speech unrelated to federal securities law,” the lawyers wrote. “Any goals provided by the pre-approval provision have been served.”
Even if this provision were somehow removed, which is unlikely, Musk would still be subject to Tesla’s own control and disclosure procedures because of his use of his personal Twitter account. to disclose news and information to investors. Tesla disbanded its press office in 2020.
“As long as Musk and Tesla use Musk’s Twitter accounts to disclose information to investors, the SEC can legally investigate issues related to Tesla’s disclosure controls and processes, including Musk’s tweets about Tesla, as well as the accuracy of Tesla’s public statements about controls and procedures,” Melissa Armstrong, SEC regulator wrote in a filing in Manhattan federal court earlier this year.
