Elon Musk’s Tesla Tweets Twice Violated Court-Ordered Policy: SEC

The Securities and Exchange Commission (SEC) told Tesla that Twitter activity from the firm’s CEO, Elon Musk, twice violated a court-ordered policy requiring his tweets to be approved by company lawyers, per The Wall Street Journal. 

Musk often tweets about crypto, but here, the SEC was specifically concerned with tweets about Tesla’s solar roof production volumes and its stock price. 

In May 2020, the SEC told Tesla that the company had “failed to enforce these procedures and controls despite repeated violations by Mr. Musk.” 

“Tesla has abdicated the duties required of it by the court’s order,” the SEC’s letter added. Senior SEC official Steven Buchholz also signed the letter.

SEC eyes Tesla tweets

The requirement for Musk’s tweets to be pre-approved by Tesla was an enforcement action the SEC applied to the company in the wake of the 2018 fraud investigation.

Musk and Tesla resolved the SEC investigation without admitting or denying wrongdoing. 

The SEC’s social media policy has since caused more friction between Tesla and the SEC. On July 29, 2019, Musk tweeted, “Spooling up production line rapidly. Hoping to manufacture  ⁓1,000 solar roofs/week by end of this year.” 

This tweet, per the SEC, was required to be signed off by the company. 

The SEC’s requirement included any public messages that addressed “production numbers or sales or delivery numbers,” according to a letter the SEC sent Tesla in August 2019. 

On May 1, 2020, Tesla’s shares fell following a tweet from Musk that simply said, “Tesla’s stock price is too high imo.” Again, the SEC was dissatisfied, but Tesla said the tweet merely reflected personal opinion and thus did not require authorization. 

“In the face of Mr. Musk’s repeated refusals to submit his covered written communications on Twitter to Tesla for pre-approval, we are very concerned by Tesla’s repeated determinations that there have been no policy violations because of purported carve-outs,” the SEC said in another letter dated May 8, 2020. 

Per The Wall Street Journal, Tesla's outside counsel said regulators had tried to “harass and silence Mr. Musk.” 

At the heart of this issue is the SEC’s perception of potential investor harm. In a June 2020 letter, the SEC said, “We urge the company to reconsider its positions in this matter by acting to implement and enforce disclosure controls and procedures...to prevent further shareholder harm.”

Musk’s crypto tweets

While these reports did not discuss Musk’s crypto-related tweets, a study by the Blockchain Research Lab recently showed that Musk’s Bitcoin and Dogecoin musings also impact those crypto markets. 

“Based on six recent cryptocurrency-related Twitter activities, we identify highly significant abnormal trading volume following each event,” said Lennart Ante, a researcher at the Blockchain Research Lab, adding, “We discover significantly abnormal returns of up to 18.99% for Bitcoin and 17.31 for Dogecoin across different time frames.” 

Much like tweets about Tesla stock prices or solar roofs, tweets about crypto have consequences, too. 

“If a single tweet can potentially lead to an increase of $111 billion in Bitcoin’s market capitalization, a different tweet could also wipe out a similar value,” said Ante.