Elon Musk accused the Securities and Exchange Commission of “unprecedented over-reach” as he asked a federal judge to dismiss the regulator’s attempt to hold him in contempt of court.
The Tesla chief executive denied he had violated a settlement with the SEC in a 33-page court filing on Monday evening, arguing the agency had gone too far in seeking a contempt order.
“The court should reject the SEC’s invitation to trample on Musk’s First Amendment rights,” wrote Mr Musk’s lawyers, who argued the securities regulator was engaged in an “unconstitutional power grab”.
The broadsides from the entrepreneur came after the regulator accused him of breaking a 2018 settlement that required him to seek preapproval from a Tesla lawyer for any tweets containing material information about the carmaker.
The agreement stemmed from Mr Musk’s claim on Twitter that he had “funding secure” for a buyout of publicly listed Tesla, a claim the SEC found was false as it imposed a $40m fine on both him and the company.
Last month, Mr Musk attracted the ire of the regulator again after he tweeted about Tesla’s vehicle production estimates and subsequently had to correct it. The SEC asked the judge in New York who oversaw last year’s settlement to hold Mr Musk in contempt of court for violating the settlement.
In his filing on Monday, Mr Musk conceded that none of his tweets since the settlement through to February had been preapproved by lawyers at Tesla. But his attorneys argued that he had the right to make his own determination about whether his tweets contained material information.
None of his tweets had risen to the level of materiality, and therefore preapproval, Mr Musk’s lawyers added. This included the vehicle production tweets last month, which they called “shorthand gloss on and entirely consistent with prior public disclosures”.
“Musk correctly used his discretion to determine that his . . . tweet was not material and did not contain information that could reasonably be considered material,” wrote the lawyers.
The latest round of duelling between Mr Musk and the US markets watchdog came as Tesla grappled with a host of problems alongside the chief executive’s tweeting.
The carmaker has seen an exodus of senior executives, including its general counsel the day after Mr Musk’s February 19 tweet. On Sunday, Tesla suddenly U-turned on a plan to close most of its retail stores, forcing it to raise prices just days after announcing a price cut.
The court filing on Monday repeated Mr Musk’s arguments the SEC’s enforcement activities had hurt Tesla’s shareholders more than it helped them, including by weighing on the share price.
The filing pointed to the fact the February 19 tweet was posted outside of normal trading hours and to the absence of “any notable move in Tesla’s stock price” resulting from the post.
“By contrast, the SEC’s filing a motion seeking to hold Musk in contempt caused a 3.4% decline in Tesla’s stock price during after-hours trading,” wrote Mr Musk’s lawyers.
Even as Mr Musk criticised the SEC, however, there were signs of a more conciliatory approach in other parts of the court filing.
While he had not sought preapproval for tweets before the SEC’s contempt filing last month, he had done so for “a wide range of Tesla-related proposed tweets, even those that are clearly immaterial”, wrote a lawyer for Tesla in a March 11 letter to the SEC attached as an exhibit to Mr Musk’s filing.
In a sworn declaration, Mr Musk added that he was trying to comply with the terms of last year’s settlement, as evidenced by the reduction in his tweeting.
“Among other things, I have dramatically decreased the amount that I tweet about Tesla,” he said. “I have cut my average monthly Tesla-related tweets nearly in half.”
