Musk hits back at SEC as Tesla share price falls – The Wall Street Journal

DUBLIN — It has been a chaotic few weeks for Tesla (again). So far this month, Musk was warned by the SEC for allegedly violating the terms of his agreement with them, Tesla announced sweeping plans to close all its stores and go online-only, and Tesla did an about-face and said it would keep most stores open. Tesla also announced this month that it would be raising the prices on its high-end cars after lowering them in February and Musk is now wading deeper into his fight against the SEC. Most companies would have spread all that out over more than a few days. Unsurprisingly, the Tesla share price has ticked down from close to $320 at the end of February to around $280 now. Now, obviously Tesla is a young company. It's also doing something very difficult in attempting to build an auto manufacturer from scratch in a highly competitive and global market. But this type of chopping and changing must be giving investors whiplash. The core issue seems to be that Tesla is struggling to hit its production goals and churn out a few thousand vehicles a week (something most car manufacturers do every day). It's inability to scale up and achieve economies of scale has meant that it is struggling to be reliably profitable. The fact that, unlike most auto manufacturers, Tesla directly owns all of its dealerships and handles all of its own sales to the end user has added further complexity to the company's business model. Further complicating matters, Musk has shown himself to be a lose cannon, particularly on social media, which has meant a lot of unnecessary distraction for management and shareholders. Like most people, I want to see Tesla succeed. However, its current approach doesn't seem to be bearing the necessary fruit. It may be time for the company to reassess its strategy and management. – Felicity Duncan.Tesla's Elon Musk Rebuts SEC's Motion to Hold Him in Contempt.By Dave Michaels and Tim Higgins.Tesla Inc. Chief Executive Elon Musk on Monday pushed back against regulators, telling a federal judge he didn't violate a fraud settlement that restricted his social-media communications and suggested the government is trying to muzzle him..___STEADY_PAYWALL___.In a filing made late Monday, Mr. Musk's lawyers said the Securities and Exchange Commission hasn't shown that his tweet on Feb. 19 was material, while the federal agency is overreaching by suggesting he needs prior approval for any statement that relates to Tesla..The SEC in February said a tweet by Mr. Musk violated a condition of his 2018 enforcement settlement. In that case, Mr. Musk and Tesla agreed to pay $20 million each over claims that he tweeted misleading information about taking Tesla private..But Mr. Musk has continued to feud with the SEC since the settlement, occasionally insulting the commission and saying he doesn't respect the agency.."Undeterred, and perhaps embarrassed by Musk's criticism of it, the SEC urges the court to read and apply the order in an unconstitutional manner," Mr. Musk's attorneys at Hueston Hennigan LLP wrote..An SEC spokesman didn't immediately respond to a request for comment..Under the settlement, Mr. Musk was supposed to have a social-media monitor pre-approve any tweets that could affect the company's stock. But a message he sent on Feb. 19 about 2019 production volumes wasn't reviewed, according to the SEC and a company lawyer..The SEC as a result sought to hold Mr. Musk in contempt of court, a move aimed at compelling him to fully comply with the settlement terms..The offending tweet was sent on Feb. 19, when Mr. Musk talked about Tesla's anticipated production levels for 2019. The SEC said the tweet contained new information that could be material to shareholders and hadn't been reviewed by Tesla's lawyers, in violation of the court's order..Mr. Musk's message said that Tesla made zero cars in 2011 "but will make around 500K in 2019." Hours later, working with an in-house lawyer, he posted another message that said he "meant to say annualised production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.".A lawyer for Tesla previously acknowledged the first tweet wasn't given prior approval. The attorney, Bradley Bondi, argued that Mr. Musk believed such a review wasn't necessary because similar figures were part of the company's Jan. 30 earnings update, according to court records..In their filing Monday, Mr. Musk's legal team, led by California attorney John Hueston, told the court that Tesla and its CEO had complied with the oversight policy by reviewing his tweet and providing some context and clarity for it..The lawyers also told the court that his tweet simply repeated information that Mr. Musk made in an earnings call and that Tesla itself included in its 2018 annual report, which was issued the same day he tweeted.."The tweet was simply Musk's shorthand gloss on and entirely consistent with prior public disclosures detailing Tesla's anticipated production volume," Mr. Musk's lawyers wrote. "Moreover, it is clear from the context of the tweet that it was celebratory and forward-looking—a type of statement that courts have concluded is immaterial as a matter of law.".Mr. Musk's lawyers argued that the CEO has "diligently attempted to comply" with the SEC's order, while noting he cut his average monthly Tesla-related tweets by nearly half in the three months following the settlement..The stakes for Mr. Musk in the contempt motion are unclear but probably don't include the threat of losing his CEO title, according to lawyers..U.S. District Judge Alison Nathan must first decide whether to hold him in contempt for violating the settlement. The SEC hasn't proposed what kind of punishment he should face if Judge Nathan determines he should be held in contempt..Mr. Musk's 2018 settlement stemmed from a tweet he sent on Aug. 7 that allegedly misled investors about taking Tesla private. The message said he had secured the funding for the deal. Tesla shares soared on the news, only to plummet in following days as it became clear the deal wasn't close to being completed..The SEC initially sought to strip Mr. Musk of his CEO role when it sued him, but it eventually agreed to a deal that removed him as chairman for three years and left him as CEO. Analysts worried that, without Mr. Musk, Tesla would struggle to raise the capital it might need to fund its ambitious growth plans..The deal also fined Mr. Musk and Tesla each $20m, and imposed unique corporate-governance rules, such as requiring Tesla to pre-approve any of Mr. Musk's statements – including tweets – that could affect how investors view the company's stock. Tesla was required to enact those policies at the end of last year..On Monday, the SEC separately revealed that two of five commissioners voting on the settlement objected to parts of the order. Republican Commissioner Hester Peirce voted against the $20m fine, while she and Elad Roisman, another Republican, opposed the required vetting of Mr. Musk's tweets, according to a brief summary..Mr. Musk continued to goad the agency since the settlement, calling it the "Shortseller Enrichment Commission" in one tweet. In December, on CBS News' "60 Minutes," he said that he wanted "to be clear. I do not respect the SEC.".His battle with Washington capped a period of scrutiny as Tesla struggled to increase production of its Model 3 car. The compact electric sedan is Mr. Musk's bet that Tesla can evolve into a mainstream car company from a niche luxury brand. After starting production in 2017, the company struggled to meet production goals, missing several self-imposed deadlines while some investors fretted about its low cash balance..Mr. Musk, on Twitter again after the latest SEC motion, pointed out that during a public conference call with analysts he suggested Model 3 deliveries could range between 350,000 and 500,000 this year. Several days later, in a conference call with reporters, he said the company may make a total of 600,000 vehicles this year..Increased production of the Model 3 helped Tesla deliver about 245,000 vehicles last year after selling almost 103,000 in 2017. On Thursday, Mr. Musk is expected to reveal the company's next vehicle, the Model Y, a compact sport-utility vehicle..Write to Dave Michaels at dave.michaels@wsj.com and Tim Higgins at Tim.Higgins@WSJ.com

Musk hits back at SEC as Tesla share price falls – The Wall Street Journal

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