Thread by @sokane1

Tesla CEO Elon Musk responded to the Securities and Exchange Commission’s recent attempt to hold him in contempt of court tonight theverge.com/2019/3/11/1826…

The SEC sued Musk for securities fraud last fall after his abandoned attempt to take Tesla private, a move for which he infamously tweeted he had "funding secured."

The SEC eventually found out that was not true, and part of the settlement that Musk agreed to was that his tweets regarding Tesla, which is publicly traded, would be watched over/approved by a Tesla-appointed lawyer.

(One reason for this is publicly traded companies have to go through proper disclosure processes so that all interested parties — shareholders, people at the company, the SEC itself — all find out and can act on information at the same time)

ANYWAY. On Feb 19th Musk tweeted that Tesla would make "around 500k" cars in 2019, which contradicted Tesla's own official guidance for the year of 360k-400k. The SEC saw this and asked Tesla if the tweet had been approved by the lawyer appointed following the settlement.

Turns out it hadn't, which is why Musk had issued a correction hours later. On Feb 25th, the SEC went back to the court in Southern District of New York and said "hey, he violated the settlement, please hold Musk in contempt of court for violating your ruling."

That brings us to tonight. Tonight was the deadline for Musk and his lawyers to explain why he shouldn't be held in contempt. The brief they filed is a doozy.

Right out the gate Musk says that Feb 19th tweet was "immaterial" to Tesla, which is wild because this company lives and dies by its production numbers. The company is perpetually on a knife's edge w/ its margins, so it really matters how many cars it makes.

Musk says he exercised his own "reasonable discretion," and argues that the language of the SEC settlement allows him to be considered one of the "Authorized Executives" to approve his own tweets, which I'd imagine the SEC might push back on

The tweet "was simply Musk’s shorthand gloss on and entirely consistent with prior public disclosures detailing Tesla’s anticipated production volume," his lawyers argue, which is interesting because Musk and Tesla have shared a number of different production goals for 2019.

1/30 SEC filing: Tesla says 360k-400k total cars in 2019.
1/30 earnings call: Musk says 350k-500k *Model 3s alone* in 2019
2/19 tweet: Musk says around 500k total cars in 2019
2/28 call with reporters: Musk goes back to 350k-500k Model 3s plus 70k-100k Models S/X

Back to tonight's response from Musk and his lawyers: they also say his 2/19 tweet was "was celebratory and forward-looking—a type of statement that courts have concluded is immaterial [to Tesla] as a matter of law."

*Then*, Musk and his lawyers argue that even if the 2/19 tweet *was* material to Tesla, he has "diligently attempted" to comply with the SEC settlement. They say he has "dramatically reduced his volume of tweets," esp. regarding Tesla, and even refer to it as *self-censorship*

Musk and his lawyers also say there was "no need" for the correction he tweeted, and point to how he issued the correction "promptly" (the tweets were ~5 hours apart) as an example of how he was trying to comply with the terms of the SEC settlement.

Lastly, Musk says the SEC is trying to strengthen the language of its settlement so much that it would restrict his right to free speech, which is an argument he made on 60 Minutes last December

Now we get into specific details as Musk & his lawyers explain background/circumstances of the 2/19 tweet. Here, Musk & co say he sent the correction tweet "out of an abundance of caution and because pundits & others tend to scrutinize statements by Musk and Tesla for criticism

Musk's lawyers also hammer home the "demanded" language, painting the SEC as inconsiderate for asking for some of this information on a Sunday, as well as framing the agency as impatient

Here Musk and his team argue again that his 2/19 tweet wasn't material to Tesla because it didn't cause a movement in the stock market, and then they contrast it with how the SEC's request for Musk to be held in contempt appeared to move the stock price 3.4%

"The tweet was simply not 'news'."

Here, Musk's lawyers say again that Musk's tweeting frequency is evidence that he has tried to comply with the SEC settlement. "Musk has cut his average monthly Tesla-related tweets nearly in half."

Musk and his lawyers say the SEC's evidence that he was not diligent enough in complying w/ the settlement is "uncompelling," and adds that the SEC’s "heavy reliance" on the 60 Minutes interview — where Musk said he doesn't respect the SEC — "smacks of retaliation and censorship"

"the SEC jumped at the first opportunity to move for contempt against Musk, refusing to wait even one business day for responses from Musk’s counsel (after requesting information on a Sunday)."

Here's one of the strongest punches Musk and his lawyers pull: calling the SEC's actions an "unconstitutional power grab"

And finally (for tonight), Musk submitted sworn testimony as part of his team's response to the SEC. Again he states that he only corrected himself "out of an abundance of caution and because pundits and others were consistently looking for any reason to criticize me or Tesla"

(Sorry, meant “throw” not “pull” here)

https://twitter.com/sokane1/status/1105308445866160128?s=21

To my untrained legal eye, this is one of the crucial points of this whole mess. Tesla and Musk spent the last 2 months issuing multiple different predictions for production in 2019, and now Musk is trying to use that to his advantage

https://twitter.com/sokane1/status/1105298837462224896?s=21

... which is probably why it’s good a judge will ultimately rule on this!