‘Put your reasonableness pants on’: Elon Musk, SEC get 2 weeks to settle tweet dispute

NEW YORK — A federal judge is giving Tesla CEO Elon Musk and the US Securities and Exchange Commission two weeks to settle their differences.

Judge Alison Nathan said Thursday that should use the time to renegotiate and clarify parts of a 2018 settlement agreement that required stricter oversight of Musk’s social media use. The deal has been the centerpiece of a months-long standoff between the tech billionaire and federal securities regulators.

The SEC had asked the court to hold Musk in contempt for violating an agreement that requires he get pre-approval for social media posts about the electric car company.

“Put your reasonableness pants on,” Nathan told both sides during a hearing in New York on Thursday.

Nathan essentially punted the issue on Thursday by asking Musk and the SEC to go back to the drawing board and better define exactly how and when Musk’s tweets need to be reviewed.

Musk, who was present for Thursday’s hearing, told reporters afterward that he was “very impressed” with Judge Nathan. He left the courthouse in a Tesla.

If Nathan ultimately sides with regulators and holds Musk in contempt, he could face another hefty fine and further limits to his social media use. The judge could oust Musk from the CEO seat, although she is not expected to rule that harshly. Nathan could also toss out the settlement with the SEC, effectively reopening the agency’s litigation against Musk and Tesla.

The SEC claims Musk violated their 2018 settlement deal when he said in a February 19 tweet that Tesla will make around 500,000 cars in 2019. Hours later, he posted another tweet that said the company will actually deliver 400,000 cars this year.

Although Musk corrected the mistake, regulators said he had “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers,” according to court papers. Musk has denied wrongdoing and accused the SEC of trying to stifle free speech.

Tesla had agreed to establish a board committee to oversee Musk’s posts. In a court filing, Tesla conceded Musk did not receive pre-approval from anyone on that committee for his February posts, but the company has since claimed that he didn’t need it.

Musk’s standoff with the SEC started last year when he claimed in a tweet that he was “considering” taking Tesla private at $420 a share and that he had secured funding for the deal. That sent Tesla’s stock surging.

But the SEC later said funding was not, in fact, secured, and the agency accused him in a lawsuit of misleading investors. Musk initially signaled that he would fight the agency, but weeks later regulators announced that he and Tesla had agreed to settlement deals that saddled them with $40 million in fines and required Musk to step down as the company’s chairman. He retained the role of CEO.

Since that deal was reached in October, Musk has openly mocked the SEC, suggested its oversight is “broken” and said he does “not respect “ the agency.

Musk also said in a December interview with “60 Minutes” that he would not allow all of his tweets to be proofread, though he insisted that he planned to comply with the settlement terms out of “respect” for the “justice system.”

After he posted the erroneous tweet in February, the SEC hit back by filing a new suit asking a federal judge to hold him in contempt. The agency claimed Musk had not “made a diligent or good faith effort” to comply with the settlement and pointed to his “60 Minutes” interview as evidence he was not taking the terms seriously.

The escalating situation, and other erratic behavior by Musk, left many investors wondering what it would mean for Tesla if its famous CEO was ousted from the company. A Barclays analyst suggested Tesla’s stock has a $130 “Musk premium,” which could disappear if he leaves.

Elliot Lutzker, a securities attorney at Davidoff Hutcher & Citron LLP and a former SEC prosecutor, said on Thursday he thinks the court will consider Tesla’s wellbeing in deciding if or how to punish Musk.

“The court does not want to hurt Tesla shareholders,” Lutzker told CNN Business in an email on Thursday.

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