He’s at it again.
Launching a Friday morning tweet-tear, SpaceX and Tesla CEO Elon Musk wrote, “Tesla stock price is too high imo [in my opinion].” Ask, believe, receive: The electric-car maker’s stock price immediately began to dip, finishing the day down 10 percent.
It’s curious for any executive to say the company’s stock is too high. It’s especially curious for Musk—even though, in just the past 48 hours, the billionaire has tweeted (then deleted) an image of a cursing unicorn topped by American flags and a pledge to rid himself of nearly all material possessions. That’s because Musk has been sued by US securities regulators for posting about his business before. To settle that case, he agreed to have tweets about Tesla reviewed by the company’s lawyers.
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The tweet topped off a wild week for the automaker, which announced a surprise profit in the first three months of the year despite Covid-19–related closures at its assembly plants in Shanghai and California. But Musk received more attention for his remarks—launched on Twitter and continued on a call with analysts Wednesday—complaining that shelter-in-place orders were “forcibly imprisoning people in their homes against all their constitutional rights” and “fascist.”
A CEO calling the company’s stock price overvalued could hurt the enterprise and its investors in the short term. “Very few CEOs have ever said this—or anything close,” says John Coffee, who directs the Center on Corporate Governance at Columbia University Law School.
Still, Coffee says he’s not sure Musk could get in trouble with the Securities and Exchange Commission for the missive. “It is hard to impossible to call this fraudulent, and it is a statement of opinion,” he says, the sort of thing a company executive is permitted to say. “I tend to doubt that the SEC will choose to take on this one.”
Others aren’t as sure. Because Musk knows more about his company—material, nonpublic information—than its investors, it’s possible the CEO is using Twitter to manipulate the price of Tesla stock and lead investors to buy or sell, says Stephen Diamond, a professor of corporate finance and securities regulation at the Santa Clara University School of Law. It’s a real problem for Musk if the tweet is misleading, he says, and could lead to more scrutiny from regulators. It’s an even real-er problem if the tweet can be linked with any sort of trading activity, including stock buybacks. Musk could be accused of insider trading.
The tweet is especially risky for Musk and company because of their prior clashes with the SEC. Both Musk and Tesla paid $20 million apiece in September 2018 to settle with the SEC over a tweet in which the CEO said he had the funding to take Tesla private—a statement that was untrue. As part of that settlement, Musk agreed to have any communications that could contain information “material” to Tesla reviewed by a company lawyer, including tweets.
Just a few months later, the SEC accused Musk of violating the settlement, after he appeared on Twitter to shift the company’s guidance on how many cars it would make in 2019. Though the CEO corrected the tweet a few hours later, Tesla lawyers admitted that the original hadn’t been approved. The SEC asked a federal judge to find Musk in contempt. Tesla, Musk, and the SEC refined their settlement in April, clarifying that Musk needed preapproval to tweet about Tesla’s financial state, its sales or delivery numbers, or information about new products.
That context makes Musk’s market-moving statements that much dicier and a possible violation of that settlement. “CEOs have, from time to time, made comments about the value of their businesses,” says Diamond. “The problem is that this is Elon Musk.”
Tesla did not respond to a request for comment. A spokesperson for the SEC declined to comment on the tweet.
The San Francisco Bay Area’s shelter-in-place orders have kept Tesla’s Fremont, California, factory closed since March 25, and the extension of the orders promise to keep it shut for the rest of the month.
Musk’s Friday-morning tweets—rare for the CEO, who tends to do his posting late at night—went on to agitate, once again, for giving “people back their FREEDOM.” He tweeted part of the national anthem. Then the CEO tweeted that he was “selling almost all physical possessions. Will own no house.” Wait, he clarified: A house formerly owned by the actor Gene Wilder, which Musk purchased, couldn’t be torn down or “lose any of its soul.” Then he said his girlfriend, the musician Grimes, was angry at him. Before signing off for a few hours, he made a little more news: He tweeted that his and Grimes’ first child, his seventh, is due on Monday.
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