Whitney Tilson’s email to investors discussing the SEC’s reply to Musk’s order to show cause. The SEC wants the court to hold Elon Musk in contempt over Tesla tweets and for ignoring the court’s order and the Tesla policy.
The SEC’s brief is out – attached and posted here.
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Wow, you don’t see this kind of body slamming very often…
Paragraph 2, Page 1:
The Court-ordered pre-approval requirement for Musk’s written communications lies at the heart of the settlement. Musk’s unchecked and misleading tweets about Tesla are what precipitated the SEC’s charges, and the pre-approval requirement was designed to protect against reckless conduct by Musk going forward. It is therefore stunning to learn that, at the time of filing of the instant motion, 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. Many of these tweets were about the topics specifically identified by Tesla in its own policies as potentially material to shareholders. Musk reads this Court’s order as not requiring pre-approval unless Musk himself unilaterally decides his planned tweets are material. His interpretation is inconsistent with the plain terms of this Court’s order and renders its preapproval requirement meaningless.
Paragraph 2-3, Page 2:
After the SEC filed its motion, however, Musk pivoted to a different explanation. He now claims he did not seek preapproval because he determined prior to publication that his tweet could not have reasonably contained material information. Dkt. No. 27, at 9-16. Musk’s contention—that the potential size of a car company’s production for the year could not reasonably be material—borders on the ridiculous. Musk’s shifting justifications suggest that there was never any good faith effort to comply with the Court's order and the Tesla Policy. Rather, Musk has simply elected to ignore them.
As Musk observes, requests by the SEC to hold a party in contempt are relatively rare. Here, the SEC acted only after—following discussions with counsel—Musk admitted that he had not sought pre-approval of the 7:15 tweet, which contained demonstrably material and inaccurate information about Tesla’s 2019 vehicle production, and then offered a purported justification that ignored the plain language of the Court's order and the Tesla Policy. Such brazen disregard of this Court’s order is unacceptable and unworkable going forward. For the reasons set forth below and in the SEC’s initial motion, the SEC requests that this Court hold Musk in contempt and impose an appropriate remedy to ensure future compliance.
Paragraph 2, Page 7:
"It is frankly difficult to follow Musk’s tortured analysis, which attempts to cobble together information from various public statements by Tesla in January 2019 to arrive at the post hoc conclusion that his 7:15 tweet was “within previously disclosed ranges.”
See the full SEC brief below.