Yesterday, the United States Securities and Exchange Commission and the CEO of Tesla took to Twitter to announce the settlement from a controversy that started after a post by Elon Musk. As released in the court filing, both parties have agreed to make an adjustment to the initial settlement. The new settlement gives a more specific explanation of the types of tweets that Musk needs to show a lawyer before posting and the tweets that may be considered misleading to investors.
Musk believed that the initial settlement was vague as it only stated that potentially material statements by the CEO must pass through an experienced lawyer before being posted. He said that the SEC assumed that he would know if a statement is “material” before asking a lawyer to vet it. So, the SEC had to amend the settlement to something more specific.
Per the new settlement, the SEC replaced the materiality baseline with specific metrics of the company that must be viewed by a securities lawyers first before they can be shared. The long list includes the tweets related to forecasts, financial conditions of the company, possible mergers, non-public filings, performance or any other thing related to the state of the company that may influence an investor’s decision.
The new settlement also had a footnote that clearly stated that the SEC’s definition of material isn’t limited to what is on the list. When asked about the filing, neither Tesla or the SEC gave any comment yesterday afternoon.
That afternoon, the company’s stock, TSLA, which was down by 5.04%, increased by 1%. Although it is important to note that Tesla recently admitted to significant losses in its Q1 report. This was followed by a 14% drop in the company’s shares, a low that hasn’t been reached in over two years.