Elon Musk Continues to Fight It Out with the SEC

Elon Musk’s highly publicized battle with the SEC continues, sending investors scrambling. But is it a problem for Tesla or just a problem for Elon Musk himself?

Due to repeated issues with the billionaire’s aggressive tweeting habits, the SEC has had him on a more restrictive digital leash. It’s now accusing him of being in contempt of a prior court order, by refusing to have his tweets reviewed before they’re sent out. It doesn’t appear as though Musk is going to play ball, and the SEC may need to find new ways to rein him in.

Elon Musk Ordered to Curb Tweeting Habit

Just a few months ago, Musk was accused of violating SEC regulations by reporting unverified information about Tesla — ultimately impacting Tesla’s trading price. On Twitter, Musk reported that he was going to be taking Tesla private and that there would be a buy out at a specific price point, all of which directly altered Tesla’s trading. Even more damning, the price point ($420) was later discovered to be part of an off-color joke.

This eventually led to a settlement with the SEC, under which Musk would first have his company-related tweets reviewed before being posted.

In the past, Musk appears to have either given little thought as to how his public persona impacted the company, or simply not understood what goes beyond the boundaries of free speech and slides into potential issues with stock price fixing. With Tesla being as volatile a stock as it already is, a few misplaced tweets can easily and dramatically alter the company’s perceived value.

SEC Files for Contempt of Court

Despite being ordered to have his company-related tweets reviewed, the SEC alleges that Musk has continued to tweet unhindered. In fact, according to the SEC, Musk hasn’t had a single one of his tweets reviewed thus far. Specifically, on February 19th, it was found that Musk had tweeted about production forecasts.

Musk has stated that he believes his tweets are not company-related, though he has tweeted about things such as the amount of cars that Tesla is expected to build. Further, he has stated that he believes the SEC is attempting to curb his free speech, and he doesn’t appear to be willing to compromise.

Elon’s Tweets and Tesla Reacts

When Musk tweets, the world listens. A major concern is that Musk’s continued tweeting may mislead investors regarding the value of the company, potentially harming both current and prospective investors. As Elon’s acted more erratic, it’s drawn some investor faith away from the business. Yet when Musk releases numbers and projections, it can bolster investor interest, and prompt the Tesla stock to rise.

In the past month, Tesla stock has been on a slow decline, even though a new model has been announced that will be more affordable to the average consumer. Some general concerns about the direction for the business as well as the SEC fight is likely to blame. More than that, the company itself has run into some trouble as of late, regarding its labor conditions as well as its general profitability.

The Model Y Crossover May Lead a Company Recovery

Right now, analysts are split as to whether the newly announced Model Y will save the company or entirely destroy it. The Model Y will open the company up to significantly more consumers, which will expand the brand’s reach beyond early adopters. It could become a tremendously popular vehicle, but the question remains whether it will be a profitable vehicle. Further, since the Model Y isn’t going to be available until a year and a half from now, quite a lot could still change for the company.

Musk’s a wildcard for Tesla right now, and unless Tesla can distance itself from Musk, it’s likely to continue to experience some intense fluctuations in price. Yet Tesla also owes much of its value to the erratic billionaire: his charismatic, visionary and — admittedly — unbalanced behavior is what has garnered interest to begin with.

What is certain is the SEC isn’t giving up without a fight: they can’t. Musk is committing unprecedented amounts of interference in the way that publicly traded companies traditionally work, and letting him continue could mean economic disaster. The SEC will likely move forward with their allegations, fines, and penalties against Musk — it’s how he and his company will react that remains to be seen.

Regards,

Ethan Warrick
Editor
Wealth Authority

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