Elon Musk, the CEO of Tesla Inc. (NASDAQ: TSLA), will appear in a New York Federal court on April 4, to defend himself against the SEC’s claim that he should be held in contempt for violating a previous settlement deal.
Judge Alison Nathan has agreed to hear the case, where Musk and the SEC will provide oral arguments regarding Tweets posted by Musk in February.
An Ongoing Battle Between Elon Musk and the SEC
The Securities and Exchange Commission sued Musk in 2018 when the outspoken CEO posted inaccurate information regarding a potential buyout of Tesla stock. Musk told his followers on Twitter that he would be taking the company private and that funding had already been secured. As it turned out, no official funding had been confirmed, and the company remained on the stock market.
The suit ended in a settlement with multimillion dollar fines for Elon Musk and Tesla. It was also agreed that Musk would seek board approval before posting information about Tesla online.
Musk Claims Free Speech Protections
In February this year, Musk told his Twitter followers that “Tesla made 0 cars in 2011, but will make around 500k in 2019.” He followed up with another tweet saying that the company will only deliver 400,000 cars in 2019.
The SEC condemned the Tweets in a court filing, saying that Musk “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers.” The SEC believes Elon Musk is now in contempt of court for breaching the 2018 settlement.
Musk claims that he has tried to follow the court settlement in accordance with the law. He believes that the latest case from the SEC interferes with his right to free speech.
What Would Happen to Musk if He is Found in Contempt?
If Elon Musk is unable to convince the court that he did not breach the previous settlement, he could face another fine, a ban on his usage of social media, and in the worst-case scenario he could be removed as the Tesla CEO. Another potential outcome could be that the settlement is nullified by the court, which would allow the SEC to open a whole new case against Musk and his company.
Despite Tesla meeting new production goals and expanding its business internationally, the negative press coverage has hurt stock this year. Tesla is currently down -19.54% year to date, and it will be difficult for stock to recover for as long as this legal battle continues.
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