So I've gone through the SEC's "Motion and memorandum of law in support of an order to show cause" filing:
I got the following impression:
- Firstly, the filing tries to make the argument that the settlement does not allow 'inaccurate' information to be disseminated by Tesla:
- "Specifically, the terms of the SEC’s settlements with both Musk and Tesla were designed to prevent Musk from disseminating misleading or inaccurate information via Twitter or other means in the future."
- Note how they slip in the "inaccurate" qualifier which word is not present in the settlement, via the "designed to", and combine it with "misleading" to make it less obvious what they are doing there.
- Forward looking statements are, by their very nature, "inaccurate". Projections are going to be missed all the time. The real question is whether Tesla agrees to Elon publishing material non-public information - and apparently they do and did, and the SEC doesn't allege otherwise (!).
- The SEC instead is trying to make the argument that Elon's tweet was "inaccurate", which is a ridiculous characterization by the literal meaning of the tweet:
- “Tesla made 0 cars in 2011, but will make around 500k in 2019.”
- The "around" qualifier and the very plain round number with 5 zeroes at the end makes it "inaccurate" by definition.
- But "a" 500k number is given in the Q4 conference call via the 350k-500k Model 3 deliveries estimate - which the SEC's filing doesn't mention at all. With S/X production added on top Elon's tweet is well within this range.
- Elon's second tweet further limits and clarifies it to the 400k deliveries and "500k annualized production" wording - but I think what matters is whether the information in the first tweet was approved by Tesla already and made public, and I believe it was.
Note that even if there's inaccuracy and conflict between these various delivery and production numbers, that's the nature of them and of predictions. Somewhat counter-intuitively it's also not against the law to have internal conflict in guidance figures as long as it's unintentional - it happens all the time and is corrected typically.
The question isn't the accuracy,
which we don't even know yet before 2019 ends, but whether it was material non-public information - which I believe it wasn't.
The SEC's case law citations look weak as well. For example their 'not willful violation' citation is:
But that case dependent on the defendant having
admitted a no-willful violation. Elon and Tesla admits no such thing, that there's an admission is entirely the SEC's construction, based on the second tweet:
“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”
They are construing the "meant to say" as an admission of non-willful violation, while I think the more reasonable reading is that it's a clarification of the very broad guided range and offset between of deliveries vs. production, plus a nailing down of the broader 500k range to an exit rate of 10k/week cars at the end of 2019, with about 400k deliveries - which is still within the guided 350k-500k Model 3 + 75k Model S/X production and delivery numbers.
But I think the more important point is that both tweets are inaccurate numerically, by their nature and by literal construction, and both are within previously disclosed ranges, i.e. not material non-public information.
Also, note that the SEC did not ask the court to hold Elon in contempt, yet. They asked the court to order Elon to 'show cause' why he shouldn't be held in contempt - which order the court granted. If Elon's filing is adequate to the SEC, they might not ask for a contempt order. (It's unlikely I think, but it's a possible outcome.)
yay
