SEC chair Clayton on Elon Musk saga: 280 characters on Twitter ‘just aren’t enough’ at times
The head of the Securities and Exchange Commission has a simple takeaway from the agency’s ongoing feud with Tesla-founder Elon Musk over his use of Twitter: Sometimes 280 characters is not enough.
“We put out some pretty clear guidelines on how to use social media as part of a communications strategy," Chairman Jay Clayton told FOX Business in an exclusive interview. "The right emphasis there is it is part of a communication strategy.”
Using Twitter as a sole communications method has landed Musk in hot water several times over the past eight months. At the heart of the ongoing saga are tweets that Musk posted last year indicating he planned to take Tesla private at $420 per share, claims the SEC later alleged were not supported by fact.
The electric carmaker and the 47-year old entrepreneur eventually settled with the agency, agreeing to pay separate $20 million fines – totaling $40 million. The agreement also required that Tesla’s lawyers review all tweets from Musk containing potentially relevant investor information before posting.
Cut to February, when the SEC alleged that Musk violated the settlement when he tweeted without prior review from attorneys that Tesla would “make around 500k [cars] in 2019,” later clarifying that the post referred to annualized production rate, not deliveries.
Musk’s attorneys on Monday claimed the SEC’s objection to the recent posts represent an ‘unprecedented overreach’ driven by Musk’s comments last year that he did not respect the SEC. Outside of filings, the SEC does not comment on ongoing cases.
“The tweet was simply Musk’s shorthand gloss on and entirely consistent with prior public disclosures detailing Tesla’s anticipated production volume,” the lawyers wrote. “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.”
The judge in the case on Tuesday ruled that the SEC could respond to Musk's latest filing. The agency has until March 19 to submit its brief.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TSLA | TESLA INC. | 242.84 | -6.14 | -2.47% |
Musk is not the first CEO to earn scrutiny from the SEC for social media habits. Netflix CEO Reed Hastings in 2012 posted information on Facebook including stats on the amount of time viewers spent on the platform.
Following that incident, the SEC in 2013 issued guidance that outlined when companies can disseminate material, nonpublic information on social media sites.
The agency recommended, among other things, that businesses alert the markets to the medium on which they intend to disclose information to prevent investors from having to “keep pace with a changing and expanding universe of potential disclosure channels, a virtually impossible task."
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The SEC also said that companies should examine whether the site is a “recognized channel of distribution,” including weighing if the information will be sufficiently disclosed.