Tesla Inc. shares plunged 5 percent Friday, the worst rout for the stock following one of Chief Executive Officer Elon Musk's parties to hype a new product or service. That order stems from a settlement reached between the SEC and Tesla in September over Musk's now-infamous "funding secured" tweet a year ago in which he said he was prepared to take the company private at $US420 per share.
Musk, who later clarified the tweet to say the number was based on the company making 10,000 cars a week, called the action an "unprecedented overreach" by the SEC, and a violation of his free speech. After that, we may finally get a chance to hear from Judge Nathan-and we'll find out whether she's as frustrated with Musk's behavior as the SEC is. During this period, the company launched a $35,000 version of its Model 3 sedan vehicle and a lower-priced SUV-Model Y. In a tweet on February 19, Tesla CEO Elon Musk said that the company "will make around 500k in 2019". "The SEC requests that this court hold Musk in contempt and impose an appropriate remedy to ensure future compliance".
Reuters reports, quoting the SEC court filing, that the regulator accused Musk of not asking the approval of Tesla's board of directors for any tweets posted since the agreement was made.
The case is U.S. Securities and Exchange Commission v. Musk, 18-cv-08865, U.S. District Court, Southern District of New York (Manhattan).
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The Twitter czar was supposed to prevent the Tesla CEO from tweeting information about the electric carmaker that could unduly rattle the market.
"As long as a statement submitted for pre-approval is not false or misleading, Tesla would presumably approve its publication without any restraint on Musk".
As part of that settlement, Musk stepped down as the company's chairman and he and Tesla agreed to pay $20 million each in fines. Musk argued that he had used his own judgment to determine that his tweets did not contain material information-and that therefore the tweets didn't require review by Tesla's legal department. In a filing on Monday, the SEC stated: "The preapproval requirement was created to protect against reckless conduct by Musk going forward".
The SEC accuses Musk of failing to have his tweets vetted and, instead, "unilaterally" deciding what is material information.