Musk lawyers accuse SEC of “unconstitutional power grab”

Enlarge / Elon Musk speaks at the 68th International Astronautical Congress 2017 in Adelaide on September 29, 2017. (credit: PETER PARKS/AFP/Getty Images)

Elon Musk’s lawyers have fired back at the Securities and Exchange Commission, arguing that the Tesla CEO did not violate the terms of his September settlement with the agency—and that the agency’s attempt to gag Musk violates the First Amendment. The SEC has asked a federal judge to hold Musk in contempt for tweeting out a projection of Tesla’s 2019 car production without first clearing the tweet with Tesla’s lawyers.

The core disagreement in the case is over whether Musk’s February 19 tweet stating “Tesla made 0 cars in 2011, but will make around 500k in 2019” was material—legal jargon for information that’s significant enough to affect Tesla’s stock price. If that 500k figure is material, then Tesla’s policy required Musk to clear the tweet with his lawyers. Failure to do so would be a violation of Musk’s deal with the SEC, which settled a previous lawsuit over another tweet containing allegedly inaccurate information.

But if Musk’s 500k tweet is not material, as Musk’s lawyers claim, then Musk did nothing wrong. Musk’s lawyers argue Tesla’s policy gives Musk discretion to decide which tweets are material and that Musk reasonably determined that this February 19 tweet was non-material. They argue that Musk’s “around 500k” figure wasn’t providing new information to the market but rather reiterating information Tesla had disclosed previously.