FLASH: Some analysts believe the Commission will come down hard on Elon Musk
Elon Musk is about to urge a judge to go easy on him for tweets that US regulators contend violated a court order, though legal experts say the feisty billionaire will have a hard time avoiding some kind of punishment.
The founder of EV maker Tesla (NASDAQ:TSLA) is in hot water with the Securities and Exchange Commission over statements last month to his 25-M Twitter followers about the company’s vehicle deliveries. The SEC says the missives violate terms of an earlier settlement prompted by his misleading August Tweets about taking Tesla private.
“The SEC will press hard on this,” said a former agency enforcement lawyer. “Disobeying an order of the court is an insult to the court and the judge. So the court has to take this seriously.’
At the SEC’s request, US District Judge Alison Nathan in Manhattan ordered Mr. Musk to explain by Monday why he should not be held in contempt of court.
Mr. Musk, who remains CEo and Tesla’s largest shareholder, has already given signs of his legal arguments that he did not disclose new information, the statements were notsignificant enough to get a reasonable investor to buy or sell Tesla shares, and he should not face penalties that would hurt the company.
Tesla attorney Bradley Bondi noted in a letter to the SEC that Mr. Musk’s initial Tweet, and the later one “clarifying” his statement, were made after the close of trading in shares on NASDAQ, limiting the market impact. Mr. Bondi also said Mr. Musk believed the information had already been reviewed for an earnings call.
Mr. Musk will likely argue that the correction made the initial Tweet more precise, but does not suggest that the 1st Tweet was material.
Elon Musk has remained defiant. After the regulator filed the contempt allegation, he Tweeted, “Something is broken with SEC oversight.”
Legal experts expect the SEC will persuade the judge to impose some kind of penalty on Mr. Musk.
This is a real problem for the SEC, as it is hard to enforce securities laws against everyone else if you’re openly letting a high-profile CEO ignore them.
The judge has broad powers, and she has the power to bar him from running Tesla or any other public company, but could also impose less onerous punishment through new fines or stricter controls on his use of social media.
A permanent ban is probably off the table, according to legal experts we have spoken to.
The case is U.S. Securities and Exchange Commission v. Musk, 18-cv-08865, U.S. District Court, Southern District of New York.
HeffX-LTN’s overall technical outlook for TSLA is Bearish in here.