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The Securities and Exchange Commission has asked a judge to hold Elon Musk in contempt for violating a deal the regulator struck with the Tesla chief executive last year, which requires him to get the approval of the Tesla board of directors before tweeting anything that could “be material to investors,” Bloomberg reports.
The tweet that prompted the SEC move said that Tesla will manufacture half a million cars this year. The tweet, however, was quickly followed by another one, clarifying that “Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.”
The SEC’s approach to a judge sent Tesla shares down 5.4 percent in after-hours trading and could lead to trouble for Twitter fan Musk.
"Having your CEO in contempt of an SEC action is a pretty bad thing,” Bloomberg quoted the director of a corporate governance center at Delaware University as saying. “They settled with him and within a few months he’s back to doing similar things. It’s unbelievable."
Musk first drew the attention of the Securities and Exchange Commission last summer when the Tesla CEO said on Twitter he was planning to take the company private and had already secured funding.
It was this phrase, “funding secured”, that alerted the Securities and Exchange Commission, which launched a probe into this claim, prompting Musk to come forward with the revelation that he had for years been in talks with the Saudi sovereign wealth fund to take the company private.
Yet the tweet and the following explanation caused changes in the Tesla stock price within two days, which allegedly affected shareholders who bought Tesla stock in the period.
Now, Musk is facing a range of possible penalties, the harshest of which would be his removal from the chief executive seat and barring him from running another public company for a set period of time.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.