It is reported that earlier, musk talked about many news of listed company Tesla on twitter, which triggered disputes and lawsuits with the U.S. Securities and Exchange Commission (SEC). According to four people familiar with the matter, since April 2019, after the court hearing on Musk's release of privatized Tesla tweets, the SEC has opened the door to musk and no longer "bite so hard", but the "cat and mouse war" between the two sides has continued to this day.
New problems faced by SEC
Previously, musk posted on twitter that it would privatize and acquire Tesla, which triggered a lawsuit and signed a settlement agreement with the sec. The SEC asked Tesla lawyers to review Musk's tweets about listed companies. However, musk continued to make mistakes, talking about Tesla's pure tram production through Twitter, and then the SEC asked the court to rule that musk was in contempt of court.
In regulating Musk's remarks, the SEC is almost doing a job that it has not done in the past. The SEC stipulates that listed companies and senior executives must disclose accurate information related to investors, and must pass the information channels mastered by investors. However, the SEC did not specify in detail how listed companies disclose.
In 2019, American judge Alison Nathan believed that the terms of the settlement agreement signed by musk and the sec were extensive, requiring both parties to reach a new agreement.
Four sources said that US SEC officials originally believed that if a lawsuit or charge was filed against Musk's Twitter speech, it should be supported by the US court. But judge Alison Nathan's statement hit their confidence.
Many materials and the interview results of many people show that after judge Alison Nathan's statement, the attitude of U.S. SEC officials towards musk tends to soften. They just urge him to abide by the settlement agreement of reviewing the speech, and no charges are filed through the court.
A spokesman for the SEC did not comment on the tacit agreement with musk. Tesla and twitter spokesmen, as well as representatives of judge Alison Nathan, did not comment.
Relevant court documents and Tesla's e-mail show that Musk's defense lawyer Alex spiro and other lawyers believe that Musk's later tweets did not violate the content of the settlement agreement.
Recently, musk proposed to acquire the twitter website in his personal capacity, and his remarks and actions on twitter have attracted attention again. The above media reports also revealed the complex relationship between musk and twitter.
Musk, the world's richest man, currently has 95 million followers on twitter. As an influential celebrity, Musk's relationship with the SEC has not returned to normal. In April, when he was interviewed by the media, he actually called the SEC an "asshole".
In early 2021, the leadership of the SEC has changed since the Biden administration took office. The above sources said that it was unclear how the current sec handled the rigid relationship with musk.
Under the leadership of Gary Gensler, the current head of the US SEC, the SEC is cracking down on the problem of repeated mistakes by listed companies or executives, and offering more severe punishment measures.
Court documents show that the SEC recently launched more investigations into musk. One of the surveys focused on his tweets last November. At that time, musk asked his fans whether they should sell some of his Tesla shares.
In March this year, the above judge Alison Nathan was promoted to judge of the "United States second circuit court of Appeals" in New York. In the SEC and musk proceedings, the judge in charge has become Lewis Liman, who has made some recent decisions in favor of the SEC in general.
Major information disclosure
It is reported that since 2013, Tesla has been telling investors to pay attention to Musk's Twitter account, so as not to miss important information. However, Musk's tweet released on August 7, 2018 triggered a conflict between him and the sec.
At that time, musk announced that it would privatize and acquire Tesla, and the acquisition funds had been found. This tweet led to a sharp rise in Tesla's share price. Subsequently, the SEC launched an investigation and found that musk did not even discuss key transaction terms with institutions that might provide acquisition funds at the time of posting.
In September 2018, SEC officials informed musk to make a "multiple choice question". Either face sec charges and lawsuits in court, or reach a settlement to avoid worse losses. Finally, musk chose reconciliation.
On April 4, 2019, the court hearing on this case was held. "This case is really unusual," judge Alison Nathan said However, Alison Nathan's statement on the contents of the settlement agreement has not been reported by the media in the past.
The settlement agreement requires Tesla to establish a system to supervise Musk's posting behavior, including recruiting or appointing an experienced securities law lawyer to review Musk's tweets.
Musk also agreed that in the future, when writing tweets, he will confirm the facts and provide evidence. In addition, he will resign as CEO of Tesla and only serve as chairman. However, the settlement agreement does not set a date for the termination of the control act.
The settlement agreement requires that if Musk's social media posts (including twitter tweets) include important information related to the interests of Tesla investors of listed companies, they must be approved by the review lawyer before publishing.
However, what kind of information is a major disclosure related to Tesla investors? This problem was later decided by musk and Tesla.
Six months later, on February 19, 2019, musk posted that Tesla's electric vehicle production in that year was estimated to be "about 500000". In court documents, SEC officials said that if the tweet was not reviewed in advance, it would be a violation of the settlement agreement, because the output of electric vehicles is an important information affecting the stock price.
The SEC asked Tesla whether musk had reviewed this post in advance. Tesla's lawyer replied that it had not been reviewed.
The SEC said in court documents that since the launch of Tesla's "Musk tweet review system", Musk's tweets about Tesla have never been reviewed in advance.
SEC lawyers said musk talked about Tesla more than 80 times on twitter, but never reviewed it. "The SEC thought everyone would behave properly."
In the court response, Tesla's lawyer said that musk did not conduct a prior review because his tweet did not disclose significant information about Tesla.
Judge: please come up with a rational solution to the problem
According to four sources, in the view of the SEC, musk violated the settlement agreement, and the facts are clear.
In April 2019, the SEC looked to the court for an explanation, and they accused musk of contempt of court. In the United States, "contempt of court" is a felony that can lead to fines or even imprisonment.
The SEC asked the court to order musk that it must report to the SEC every month whether it has complied with the agreement to review tweets. In addition, it asked for punishment for Musk's violation.
Four sources said that SEC officials believed that Musk's violation of the agreement was clear, so the SEC should have an advantage in the court contest.
According to a ruling of the Supreme Court of the United States in 1976, the material disclosure information of listed companies is defined as "information considered important by a rational investor".
However, in the lawsuit with musk, the SEC's identification of major information is broader. Musk's lawyer said that the SEC's interpretation of the "audit musk post system" was wrong and too broad.
Judge Alison Nathan believes that the text of the agreement between the SEC and musk is too extensive in determining what kind of tweets are major disclosures. Alison Nathan also supports Musk's argument that there is no need for the SEC to solve these problems through the court.
Judge Alison Nathan did not decide whether Musk's post was a material disclosure or whether his behavior was contempt of court. She said that everyone should take a "deep breath" and come up with rationality to resolve disputes.
Four sources said that in the face of Alison Nathan's statement, SEC officials believed that there was no other way but to modify the settlement agreement.
The SEC, Tesla and musk agreed to revise the agreement to be more specific and detailed in terms of which tweets must be reviewed in advance. Some contents to be reviewed include Tesla's financial status, possible important transactions, production data, business outlook, etc.
On April 30, 2019, Alison Nathan approved the amended settlement agreement.
A steady stream of controversial tweets
Three sources said that in the months after revising the settlement agreement, SEC officials believed that musk was "sidestepping" and even changing the boundary of "major disclosure". However, the SEC was reluctant to go back to court to solve the problem, worried that judge Alison Nathan dismissed their complaint.
On July 29, 2019, musk posted that he hoped Tesla could produce 1000 solar roofs a week by the end of the year. On May 1, 2020, he posted that Tesla's share price was "too high".
After these two posts were issued, SEC officials quickly contacted Tesla and Musk's lawyers to ask whether they had obtained prior approval.
Musk did not review in advance. Tesla's lawyer replied to the SEC that the review was unnecessary, but the SEC did not agree.
The SEC said in an email that it hoped to resolve the dispute between the two sides in accordance with the spirit of judge Alison Nathan's ruling, but Tesla and Musk's lawyers did not provide the required documents or have a "constructive dialogue" with SEC employees.
In June 2020, the SEC informed musk that his post violated the revised settlement agreement between the two sides.
However, the SEC did not say that "the court will see the result", and the agency said: "for the future, we urge you to abide by the agreement."
The above sources also said that some SEC officials believe that the revised agreement has certain constraints on musk and can protect investors.
In addition, the SEC is unwilling to take extreme measures against musk (abolishing the settlement agreement and restarting the lawsuit). Musk has huge resources, and if it goes on, it will also bring risks to all parties.
Today, musk is Tesla's largest shareholder, holding about 16% of the shares. Two sources said that if the SEC seeks to prohibit musk from serving as a director or executive of a listed company, it is not in the interests of Tesla shareholders and will weaken Musk's control over Tesla.
In March, musk took a new step, asking the court to invalidate the settlement agreement he signed with the sec.
In April, Lewis Liman, the new judge in charge of the case, rejected Musk's request. Lewis Liman believes that as Tesla becomes stronger, musk tries to complain and overturn the settlement agreement signed in 2018.
Judge Lewis Liman declined to comment.