Court Rules Musk’s Tesla Tweets Still Need Attorney Approval

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An appeals court held up a ruling on Monday that Elon Musk cannot back out of a 2018 settlement with securities regulators requiring attorney approval of his tweets about Tesla, after the billionaire suggested he had secured funding to make Tesla private, wreaking havoc for shareholders.

Musk argued that the required approval of his tweets muzzles his freedom of speech.

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Key Facts

Musk challenged the terms of the 2018 settlement last year that required him to have an attorney sign off on his tweets about Tesla, arguing the order was a violation of free speech, but a Manhattan federal court struck down the appeal Monday.

The Securities and Exchange Commission investigated Musk and Tesla for securities fraud in 2018 after Musk tweeted he had “funding secured” and investor support confirmed to take Tesla private for $420 per share—a deal to take Tesla private never came to fruition, and the company’s share price fluctuated for weeks following the tweet.

Musk settled with the SEC without admitting wrongdoing, with the billionaire and Tesla each paying $20 million in fines.

Musk also agreed to step down as Tesla chairman and receive approval on all of his tweets about Tesla as part of the settlement..

In September 2022, Musk attempted to appeal the settlement, arguing the ruling requiring approval on his tweets was a “government-imposed muzzle” hindering his freedom of speech.

Monday’s ruling stated there was “no evidence” to support Musk’s claims and added he had “plausibly violated the terms” of the 2018 settlement in several other tweets since 2018, which have been investigated by the SEC.

Key Background

In February, a jury found Musk was not liable for what a group of Tesla investors claimed were billions of dollars in damages brought on by his “funding secured” claim. The plaintiffs claimed deception and sought damages after Tesla’s stock price soared following the tweets, and then fell later as it became clear the buyout would not happen. During that trial, Musk testified that he believed the tweets were truthful, saying he had lined up the necessary financing through verbal contracts with Saudi Arabia’s Public Investment Fund, which later rescinded its agreement.

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The SEC again investigated Musk’s tweets in 2019 when he tweeted he would build half a million cars that year. The SEC later filed a lawsuit claiming Musk violated the 2018 settlement, which was eventually resolved by a joint agreement clarifying the terms of the previous settlement, including a list of topics he would need approval on before tweeting about. The SEC has also investigated other tweets, such as one in 2020 saying Tesla’s stock was “too high imo” and one in 2021 asking his followers if he should sell 10% of his Tesla stock, according to documents obtained by the Wall Street Journal.

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