Elon Musk has now officially asked the court to change his 2018 settlement with the SEC in order to terminate the SEC’s policing of his Tesla tweets.
The situation between the SEC, Elon Musk, and Tesla has escalated significantly over the last few weeks.
The SEC and a lawyer on behalf of Musk and Tesla have been going back and forth in letters to the court about the pressure the agency is putting on Tesla and Musk and them fighting back against what they now see as “abuse” of the deal achieved through the settlement.
The SEC filed a lawsuit against Musk over his infamous “funding secured” comment regarding his failed attempt to take Tesla private back in 2018.
The Security and Exchange Commission (SEC) judged that Musk exaggerated and misled shareholders when saying that the funding was “secured”:
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
Musk went on a campaign against the SEC, calling them names and claiming that they were working for people shorting the electric automaker. But ultimately, Tesla and Musk ended up reaching a settlement with the SEC.
As part of the settlement, Musk agreed to step down from the role of chairman of the board, and Tesla and Musk had to each pay $20 million in fines.
The CEO presumably didn’t want Tesla to have to pay for his issue with the SEC. While he couldn’t directly pay for Tesla’s part of the fine, he decided to buy $20 million worth of shares from Tesla. That way, he sort of indirectly ended up paying for Tesla’s fine – though he also ended up with ~71,000 additional Tesla shares in the process.
As we previously reported, Musk ended up actually making money from the settlement due to Tesla’s stock price surging.
Another part of the settlement was that Musk and Tesla had to agree for the former to have his tweets reviewed by the latter’s legal department if they are material to the company. Despite the settlement, Musk didn’t change his use of his popular Twitter account with over 74 million followers, and he has remained defiant when it comes to the SEC.
As for the SEC, it reportedly sent several inquiries to Tesla about Musk’s use of Twitter when it relates to potentially material information.
Last month, Alex Spiro, a lawyer for Musk, sent a letter to the court to request an audience to discuss what he described as the SEC’s “harassment” of Tesla and Musk. He also claims that the SEC has yet to distribute the $40 million settlement money to shareholders.
The SEC quickly denied the allegations of harassment and claimed that a plan for distributing the money was going to be submitted to the court next month and the delay is due to the complexity.
The court ended up denying Musk’s request, but now they have filed a new motion in court to recant the settlement and removed the SEC’s Twitter policing of Musk (via Wall Street Journal):
In a motion filed in Manhattan federal court, Mr. Musk’s lawyers argued that the Twitter oversight policy has become unworkable, while the Securities and Exchange Commission has abused the deal to make “round after round of demands for voluminous, costly document productions, with no signs of abatement.”
In new filings to the court, Musk argued that he decided to take the settlement for “Tesla’s immediate survival” as he was being told that the ongoing battle with the SEC could prevent Tesla from raising money and that Tesla’s biggest shareholders could walk away.
He added:
“I never lied to shareholders. I would never lie to shareholders. I entered the consent decree for the survival of Tesla, for the sake of its shareholders.”
On top of the Twitter decree as part of the settlement, Musk’s lawyer also asked to squash a subpoena due to what they describe as “roving and unbounded investigations into Mr. Musk” restraining his ability to “exercise of his First Amendment rights” to free speech.
Last week, Musk said that “[he] didn’t start the fight (with the SEC), but [he] will finish it.“
The SEC has yet to answer the latest demands from Musk’s lawyer.
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