June 2, 2021
Enforcement’s Tesla Tweet Stalemate: How to Talk So Elon Will Listen?
The premise of one of my favorite parenting books is that standard negotiation techniques – logic, bribes, threats – aren’t going to deliver when it’s 8pm and my 3-year-old has been refusing to leave the playground for the last 45 minutes. In that situation, the only way out is to use a Jedi mind trick to reverse engineer and validate his deepest desires, and make the ride home even more magical and exciting than another trip down the 2-story slide.
It seems like that’s kind of the position that the SEC finds itself in with Elon Musk, especially after reading this WSJ article yesterday about the Enforcement Division’s attempts to follow up on tweets that the Commission believed went against its 2018 settlement with the Technoking. Here’s an excerpt:
From the start, the social-media policy was difficult for the SEC to enforce. The SEC accused Mr. Musk of violating the rules in February 2019 and asked a Manhattan federal court to consider holding him in contempt. The judge signaled she wanted the two sides to settle the dispute and they agreed to modify the policy by clarifying which topics required pre-approval. Those were identified as including communications about production figures, new business lines and the company’s financial condition.
Within months, the SEC was writing Tesla again, questioning a tweet Mr. Musk wrote on July 29, 2019, that stated: “Spooling up production line rapidly. Hoping to manufacture ~1000 solar roofs/week by end of this year.”
It’s not surprising that this notion of “pre-clearing” tweets isn’t playing out smoothly – the question all along has been, what can the SEC do about it? The WSJ says that the latest dispute, over a May 2020 tweet, appears to have ended in a stalemate. The Enforcement Division encouraged the company to apply its disclosure controls & procedures, Tesla said it hadn’t done anything wrong, the SEC threatened to go back to court, and nothing happened.
Yes, the SEC is still working through the permissible ways for companies to use social media. The board and Elon are also defendants in shareholder suits because of these tweets. Maybe for this high-profile CEO, someone also needs to find a way to make compliance as fun as public taunting.
– Liz Dunshee