NEW YORK: Elon Musk’s job as Tesla Inc’s chief executive appeared safe on Thursday as a federal judge in Manhattan urged the billionaire to settle contempt allegations by the US Securities and Exchange Commission over his use of Twitter.
At a hearing in Manhattan federal court, US District Judge Alison Nathan gave both sides two weeks to work out their differences, and said she could rule on whether Musk violated his recent fraud settlement with the regulator if they failed.
“Take a deep breath, put your reasonableness pants on, and work this out,” the judge said.
The hearing appeared to lift an overhang over Tesla, as the SEC stopped well short of recommending Musk’s removal as chief executive or even from the electric car company’s board.
Instead, the regulator suggested that greater oversight of Musk’s communications, including the threat of new fines if he backslides, was punishment enough, at least for now.
“What this is to the SEC is strike two, and if there is another transgression they might seek a director and officer bar,” said Peter Henning, a law professor at Wayne State University in Detroit and a former SEC lawyer. “They are just trying to send a message: be more careful.”
Nathan had been asked to hold Musk in contempt over a February 19 tweet, where the SEC said he improperly posted material information about Tesla’s vehicle production outlook without first seeking approval from its lawyers.
The SEC said pre-approval was a core element of the October 2018 settlement, which resolved a lawsuit over a tweet last August 7 where Musk said he had “funding secured” to take Tesla private at $420 per share.
That settlement called for Musk to step down as Tesla’s chairman, and levied $20 million civil fines each on Musk and the Palo Alto, California-based company.
Musk declined to discuss the hearing as he left the courthouse, surrounded by a horde of reporters, photographers and television cameras, but said “I feel very loved here.”
In a statement provided later by Tesla, Musk said: “I have great respect for Judge Nathan, and I’m pleased with her decision today. The tweet in question was true, immaterial to shareholders, and in no way a violation of my agreement.”
Tesla’s share price tumbled 8.2 per cent on Thursday, after the company on Wednesday night reported lower-than-expected vehicle deliveries, but recouped some early losses once Musk’s job no longer appeared imperilled.
The company built its reputation on luxury cars, but has faced several production challenges with its Model 3 sedan, which it hopes will reach a mass audience.
“Elon Musk was very well composed in the court today, which means he’s taking it seriously,” Craig Irwin, a Roth Capital Partners analyst who attended the hearing, said in an interview. He called Nathan’s order “a good outcome for Tesla investors.” Irwin rates Tesla “neutral.” — Reuters