MANHATTAN (CN) - Elon Musk's misleading tweets about the price of Tesla shares last year forced him and his company into paying a $20 million securities settlement. Now the tech billionaire risks being held in contempt of court over a new tweet boasting about manufacturing expectations.
In a 1-page order Tuesday, U.S. District Judge Alison Nathan gave Musk until March 11 to explain why his tweet inflating the number of electric cars Tesla expects to manufacture this year does not violate her court order.
On Feb. 19, Musk tweeted to his 24 million followers: "Tesla made 0 cars in 2011 but will make around 500k in 2019."
Some four hours later, Musk backtracked from the estimate.
"Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week," Musk tweeted. "Deliveries for year still estimated to be about 400k.”
Judge Nathan’s order follows allegations Monday by the Securities and Exchange Commission that the posts broke the terms of a final judgment requiring Musk to seek pre-approval of any written communications that could contain information material to Tesla or its shareholders.
"The SEC required this provision as a term of its settlement with Musk in order to prevent Musk from recklessly disseminating false or inaccurate information about Tesla in the future," SEC attorney Cheryl Crumpton wrote.
In a 17-page memo, Crumpton cited Musk's interview with Lesley Stahl for "60 Minutes" last December as evidence that he is not serious about compliance.
Revealing that his Twitter account remains unsupervised, a visibly emotional Musk told Stahl: "Yeah, I mean otherwise it's, 'Hello, First Amendment.'"
"Like Freedom of Speech is fundamental," he added.
Reproducing a part of the segment's transcript, regulators highlighted a passage where Stahl pressed Musk about how he would know if one of his tweets could move the market.
"Well, I guess we might make some mistakes," he said. "Who knows?"
Fighting back tears on national television, Musk proclaimed: "I want to be clear. I do not respect the SEC. I do not respect them."
Shortly after making that remark, Musk dialed back that bravado to state that he respects the justice system. Regulators wrote, however, that "his deliberate indifference to compliance with this court's final judgment indicates otherwise."
Musk's attorney Dane Butswinkas, from the Washington-based firm Williams & Connolly, did not immediately respond to an email request for comment.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
