Elon Musk and the US financial watchdog have been urged to put on their ‘reasonableness pants’ following a contempt hearing brought against the billionaire over a tweet.
The hearing was the latest stage of Elon’s battle with the Securities and Exchange Commission (SEC), which launched the case because it believed one of his Twitter posts broke the terms of a previous legal agreement.
It was feared the Tesla boss would be hit with a hefty fine, removed from his job as Tesla CEO or even banned from social media during the trial.
But Judge Alison Nathan gave Musk and the SEC two weeks to renegotiate and clarify their previous agreement.
‘My call to action is for everyone to take a deep breath, put your reasonableness pants on and work this out,’ the judge said.
This showdown started when Musk published a Twitter post last year saying Tesla would be taken private at $420 a share, allegedly choosing this number due to its significance to weed smokers and because his girlfriend would ‘find it funny’.
Musk was then hauled up on fraud charges and forced to seek ‘pre-approval’ before ‘publishing tweets that contain or reasonably could contain information material to Tesla and its shareholders’.
The SEC began proceedings against Musk for contempt after he published a tweet in February revealing that Tesla would ‘make around 500k cars’.
The watchdog called this post a ‘blatant violation’ of the previous ruling.
‘It was stunning to learn that… Musk had not sought pre-approval for a single one of the numerous tweets about Tesla he published in the months since the court-ordered pre-approval policy went into effect,’ it wrote.
”The SEC requests that this court hold Musk in contempt and impose an appropriate remedy to ensure future compliance,’ the regulator added.
In a recent legal filing, the SEC was scathing of Musk’s legal defence.
It called one argument a ”tortured analysis’ and said his claim that information about Tesla’s production was not material to shareholders ‘borders on the ridiculous’.
The SEC also dismissed Musk’s bid to suggest the pre-approval mechanism infringes the freedom of speech guarantees contained in the First Amendment.
It said this was a ‘frivolous argument’ based on a ‘misapprehension’ of the law and the ‘false premise’ that its original order interferes with Musk’s right to free speech.
If the SEC is successful in winning a contempt case, it could hit Tesla with a range of punishments which could even see Musk removed as CEO.
Yesterday, financial analysts said any punishment meted out was likely to be more severe than just a fine.
JP Morgan said ‘another slap on the wrist (i.e. a larger fine) appears unlikely’ due to the billionaire’s ‘ongoing public belligerence’ with the SEC.
‘The once impenetrable Tesla narrative appears to be eroding,’ its strategists wrote.
‘Tesla remains a story of vision, steered, for better or for worse, by Elon Musk.’
The global equities head of a firm which owns 7.7% of Tesla also recently said the company could survive the demotion of Musk. suggesting he could work as ‘chief idealogue’ instead.
‘I don’t think he needs to be CEO,’ James Anderson told Barron’s.
‘We wouldn’t be against him having a different role.’
As well as posting ill-advised tweets, Musk recently smoked weed live on the internet, a decision which may have landed him in trouble with Nasa.
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