By CCN: Elon Musk and the SEC are talking, demonstrating progress in a regulatory battle that has been drawn out for months. While the Tesla CEO and the securities regulator have yet to reach an agreement regarding a contempt of court dispute, they could be close. Musk and regulators have requested a one-week extension from a federal judge who recently advised them to “put your reasonableness pants on” and settle the Twitter spat.
Trouble in Tesla paradise began for the South African entrepreneur and CEO two months ago when Musk issued tweets that the SEC claims violated an agreement it had established with the auto mogul back in September of 2018. The tweets involved production forecasts and allegedly false numbers regarding the company’s vehicles. Musk initially stated that the company would likely build around 500,000 electric vehicles in 2019.
Elon Musk Has a Knack for Making the SEC Mad
Musk later issued a follow-up message, saying that he meant to say Tesla would reach a “peak annualized production rate of 500,000” but added that the company would likely only make about 400,000 cars throughout the year.
Tesla made 0 cars in 2011, but will make around 500k in 2019
— Elon Musk (@elonmusk) February 20, 2019
The SEC didn’t take kindly to these messages, claiming they violated the terms of a settlement that both the organization and Musk had reached months earlier. That settlement came about after Musk tweeted that funding had been “secured” to take Tesla private at “$420 per share.” Both Musk and his company were required to pay $20 million in fines as part of the settlement after the SEC claimed the verbiage constituted securities fraud.
It was also agreed that executives of the company would monitor and approve all of Musk’s communication prior to release. This included tweets and other forms of social media correspondence.
A joint submission says:
“While we have not reached an agreement, counsel for the SEC, Mr. Musk, and counsel for Tesla met and conferred for over an hour by telephone earlier this week and are continuing to discussion potential resolutions. Because our discussions are ongoing, we respectfully request to provide the Court with another joint submission on or before April 25, 2019, indicating whether we have reached an agreement in principle.”
Tesla Is Still Trapped in the Red
— Rithesh Nair (@rithesh) August 12, 2018
Last year, the forecast for the same period was $-4.19, suggesting that while Tesla has improved over the past 12 months, it’s still trapped in the red. This may be due to the ongoing technical problems of the Tesla Model 3 vehicle. While more affordable than other prototypes, the Model 3 appears to suffer from problems regarding detachable rear bumpers and lacking drainage which causes dirt and debris to pile up in the vehicle’s underbody panels.
Tesla has also laid off nearly 8% of its workforce since January after Musk commented that the company was suffering from “low profitability” during Q1.
Some analysts go further in their gloom-and-doom regarding the company’s future and are warning of an “outright disaster” for Q1 earnings next week.
A former SEC prosecutor commented that while Musk is probably not in danger of losing his job with Tesla, he may be forced to pay penalties larger than $20 million given that this is now his second offense with the organization.