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Elon Musk tweets on stock price not reviewed by Tesla lawyers, says SEC in complaint letters

The SEC has complained to Tesla in the past that it failed to check Musk's tweets on the company's performance indicators, potentially misguiding investors.

Elon Musk (Image: Reuters) Elon Musk (Image: Reuters)
Story highlights
  • New documents reveal letters exchanged between the SEC and Tesla on two of Musk's tweets.
  • The tweets by Musk were linked to Tesla's performance in the market.
  • The SEC complained that the tweets were a violation of its original settlement with Tesla.

New records reveal that the Securities and Exchange Commission warned Tesla last year of violation of their prior agreement around Elon Musk's tweets. As per the records, the securities regulators pointed out two tweets by the Tesla CEO for the violation.

A 2018 agreement between the SEC and Tesla requires a lawyer's approval for any tweets by Elon Musk about the company. The agreement was put in place after Musk was charged with securities fraud for falsely tweeting about securing funds for taking Tesla private.

At the time of the tweet, Musk had had only held preliminary talks with Saudi Arabia to fund the company. As a settlement to the charges, Musk agreed to step down as chairman of the Tesla board but remained the CEO of the company. Robyn Denholm was then appointed as the new chair of Tesla's board.

In addition to quitting his role, Musk also agreed to have his public communications (through tweets and other platforms) examined by the company lawyers. New correspondence obtained by The Wall Street Journal shows that the SEC warned Tesla of violation of this agreement twice after it was put in place.

The first incident took place in July 2019, when Musk tweeted about making 1,000 Tesla solar roofs per week by the end of the year. Another tweet made by Musk in May 2020, deeming Tesla's stock price as "too high," was also flagged similarly.

The company lawyers did not review both tweets. The SEC marked the instances through letters sent to Tesla shortly after each tweet. However, no legal action was taken against Musk or the company.

Tesla defended the tweets by Musk. On the first occasion, it marked them as "wholly aspirational," while the tweets on the Tesla stock price were deemed simply as Musk's opinion.

As highlighted by The Verge in a report, Musk was taken to court by the SEC for violating the 2018 settlement in early 2019. At the time, the Tesla CEO had tweeted an estimate for the total number of cars Tesla would make that year. The number was higher than the official company count, and Tesla lawyers had not approved the tweet.

The new records, however, had been under the wraps until now. It is unclear if the agreed-upon check on Musk's public announcements related to Tesla is strictly adhered to. Though it certainly has the SEC keeping an eye on anything that appears on Musk's Twitter feed.