Tesla CEO Elon Musk is asking a federal judge to toss a consent decree with the Securities and Exchange Commission that requires his tweets to be approved by a lawyer before he can post them.
The decree, which was signed in 2018 after Musk’s infamous “funding secured” tweet, is being used “to trample on Mr. Musk’s First Amendment rights and to impose prior restraints on his speech,” his lawyers said in a court filing Tuesday. Musk is also seeking to block an SEC subpoena related to his tweets about selling 10 percent of his stake in Tesla.
Musk sent the notorious tweet on August 7th, 2018, in which he claimed to have the funding to take Tesla private at $420 a share. (Tesla has been a publicly traded company since 2010.)
“trample on Mr. Musk’s First Amendment rights”
The SEC immediately launched an investigation, eventually concluding that, while he had held a few meetings with Saudi Arabia’s sovereign wealth fund, Musk “had never discussed a going-private transaction at $420 per share with any potential funding source, had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a ‘special purpose fund,’ and had not confirmed support of Tesla’s investors for a potential going-private transaction.”
But in a new court filing Tuesday, Musk claims that “funding was secured, and there was investor support.” He said that he felt pressure to settle the issue with the SEC or risk Tesla’s financial security.
“Despite this, the SEC’s unrelenting regulatory pressure, combined with the attendant collateral consequence of the SEC’s complaint against me, caused a scenario in which I was forced to sign the consent decree in 2018,” Musk said. “Tesla was a less mature company and the SEC’s action stood to jeopardize the company’s financing.”
Musk said he was planning on signing the decree until he learned it could negatively affect his other companies — Space X, Neuralink, and The Boring Company — as well. He said he tried to get out of it but ultimately relented after the SEC sued him for securities fraud and several major Tesla shareholders threatened to sell their stake in the company.
“funding was secured, and there was investor support.”
“I had only wanted to settle to help Tesla, but I did not wish to cause harm to the other companies,” Musk said. “It felt wrong to do so.”
The SEC is investigating whether recent stock sales by Musk and his brother Kimbal Musk potentially violated insider trading rules. The investigation began late last year after Musk and his brother sold $108 million worth of Tesla shares, according to The Wall Street Journal. That sale happened the day before Elon Musk polled his Twitter followers about whether he should sell 10 percent of his stake in the company — and promised to abide by the poll’s results.
In this week’s filing, Musk defended his actions while his lawyers seek to quash the agency’s subpoena. “I never lied to shareholders,” Musk writes. “I would never lie to shareholders. I entered into the consent decree for the survival of Tesla, for the sake of its shareholders.”
Musk’s conflict with the SEC has flared up in recent weeks. The billionaire CEO accused the agency of subjecting him and his company to “endless, unfounded investigations.” He also alleged that the agency was ignoring its commitment to distribute $40 million in fine money to Tesla shareholders, as per the 2018 settlement. And he claimed that the SEC was leaking information regarding federal investigations without providing any specific evidence to back his claim.