Silicon Valley "Iron Man" and the SEC are on the bar again, Musk: The SEC is harassing me and Tesla

On Thursday, February 17, the US stock market exploded again: Musk and the US "Securities and Futures Commission" SEC bar!

This war of words has actually been fought from 2019 to the present, with the two sides pointing fingers at each other in exchanges of letters and court documents. The SEC believes that Musk did not comply with the 2018 civil securities litigation settlement agreement that was approved and then issued by the tweet to the company's lawyers, and Tesla's lawyers believe that "the SEC is harassing Musk and Tesla, with improper purposes to silence Musk."

Tesla lawyer Alex Spiro, who has repeatedly accused the SEC of harassment, filed the latest filing thursday in U.S. district court in Manhattan, accusing the SEC of stifling Musk's right to free speech when communicating with Tesla shareholders and of violating its commitments to enforce when signing the settlement by bypassing federal court and monitoring musk's compliance with social media use rules alone.

Tesla also alleges that the SEC has not distributed a total of $40 million in fines to Musk and Tesla in the 2018 settlement to shareholders claiming to have been harmed. Tesla also argues that the SEC has conducted relentless investigations into Musk and his company, largely because Musk remains an outspoken critic of the government agency, preventing the SEC from enforcing the law of general application in a fair manner.

On Thursday, following the decline of the U.S. stock market, Tesla fell nearly 4% at one point, losing a week's high and falling more than 15% this year, outperforming the U.S. stock market.

A brief history of Musk's "head-to-head toughness" with the SEC

The SEC had accused in September 2018 that Musk's announcement in August of the same year that it would take Tesla private for $420 per share was "false and misleading", a tweet that caused Tesla's stock price to fluctuate throughout the month and that the privatization never materialized.

Musk personally and Tesla then chose to settle the charges, each paying a $20 million fine, Musk was forced to resign as Tesla's chairman for at least three years, Tesla was required to bring in two independent directors, and also needed to establish a system to oversee Musk's public statements, in which Musk's tweets and other public statements need to be approved by the company's lawyers.

However, in February 2019, Musk tweeted the production figures of the "civilian god car" Model 3, and the SEC demanded that he be held guilty of contempt of court because he violated the original settlement agreement: the tweet with the number of vehicle production was not pre-approved by Tesla lawyers. Brokered in federal court in Manhattan, the parties amended the settlement agreement in 2019 to clarify which of Musk's tweets on topics required lawyers' prior approval, including public comments about production data, new lines of business and the company's financials.

However, Musk seems determined to "get on the bar" with regulators:

In 2020, Musk called the SEC the "Short Sellers Get Rich Committee" and poured dirty water on the SEC in cryptic language.

In December 2021, within weeks of receiving the latest SEC subpoena, Musk also tried to belittle the whistleblower on a tweet. A week later, the SEC confirmed that it was investigating a complaint by a former Tesla employee that Tesla had concealed the serious fire risk of the solar PV installation.

According to an exclusive report in the Wall Street Journal, the SEC also wrote to Tesla in 2019 and 2020, accusing Musk of ignoring the court's order to use social media rules.

One of them was on July 29, 2019, when Musk tweeted that he wanted to produce 1,000 solar rooftops per week by the end of the year, and the SEC believed that the tweet met the requirement that "the number of production, sales or delivery needs to be reviewed by a lawyer", but Tesla informed regulators that Musk did not submit the tweet for review, and Tesla also believed that it did not use it, because "these numbers are only wishes and not facts."

Then, on May 1, 2020, Musk tweeted that "I personally think Tesla's stock price is too high", Tesla's stock price fell in response, and the SEC again sent a letter to Tesla asking for an audit opinion on the tweet, but the company said that this was a "personal opinion" that did not require authorization. The SEC argued that Musk's tweet was financially relevant to the company and needed to comply with the social media censorship provisions of the settlement.

In response, the SEC said, "Tesla has waived its responsibilities as required by the court order, and we are deeply concerned and urge the company to reconsider its position on this matter and take action to enforce disclosure controls and procedures to prevent further harm to shareholders." Tesla immediately replied that the SEC tried to harass Tesla and silence Musk with endless overlapping investigations, "The continuity of these investigations makes us very worried that the SEC is targeting Musk for improper purposes." "But neither side asked the court to intervene directly, as they did this time.

Analysis: The rules governing social media applications that oversee CEOs of public companies are new and controversial

Some analysts said that the court documents disclosed today seem to imply that Tesla and Musk regret the social media surveillance rules in the settlement agreement, because the documents said that "when Musk and Tesla agreed on the law in 2018, Tesla was a less mature company, and thought that reaching a settlement would eventually end the harassment of the SEC."

Requiring a listed company to approve in advance the social media remarks released by the CEO is also a relatively new tool for improving corporate governance, which is easy to cause some controversy. But Jill Fisch, a law professor at the University of Pennsylvania, argues that the controversies don't mean the policy itself is wrong, that regulatory oversight helps improve how public companies and CEOs use social media, and that a public figure with a lot of influence in the market, Musk, deserves special attention.

Some analysts have found that many of Musk's companies have always had a weak relationship with regulators. Tesla has also clashed with officials from the National Transportation Safety Administration (NTSB) and the State Occupational Safety and Health Administration in Nevada. SpaceX's relationship with the Federal Aviation Administration (FAA) has also been strained at times.