The US Supreme Court dealt a blow to Tesla CEO Elon Musk on Monday by rejecting his appeal regarding a settlement with securities regulators. The settlement mandates that Musk seek approval for certain social media posts related to Tesla, the electric vehicle giant he leads. This decision by the highest court upholds lower-court rulings against Musk, who argued that the requirement violates his right to free speech under the First Amendment.
Background: The case traces back to 2018 when Musk posted tweets on Twitter claiming that he had secured funding to privatize Tesla. These tweets caused a surge in Tesla’s stock price and prompted a temporary halt in trading. However, it was later revealed that the funding was not secured, and Tesla remained a publicly traded company.
Settlement with SEC: Following the controversial tweets, Musk reached a settlement with the Securities and Exchange Commission (SEC), which included several stipulations:
- Musk’s social media posts related to Tesla, now known as “X,” must be approved in advance by a Tesla attorney.
- Both Musk and Tesla agreed to pay civil fines for the misleading tweets about privatization.
Legal Challenge: Musk contested the settlement, arguing that the requirement for pre-approval of his social media posts constitutes “prior restraint” on his freedom of speech, as guaranteed by the First Amendment. Despite Musk’s objections, the Supreme Court declined to intervene, opting to uphold the lower-court rulings against him.
SEC’s Continued Scrutiny: The SEC initiated enforcement action against Musk over his tweets about privatization, alleging violations of securities laws’ antifraud provisions. In 2021, the agency further investigated Musk’s compliance with the settlement when he failed to seek approval before soliciting opinions from his Twitter followers regarding the sale of Tesla stock.
Musk’s Acquisition of Twitter: Adding another layer to the legal saga, Musk acquired Twitter in 2022, raising questions about potential conflicts of interest and the implications for his social media activity.
Conclusion: With the Supreme Court’s rejection of Elon Musk’s appeal, the settlement requiring pre-approval of Tesla-related social media posts remains in effect. The decision underscores the importance of regulatory compliance and transparency in corporate communications, particularly in the realm of social media where statements can have significant financial implications. As Elon Musk continues to navigate the intersection of entrepreneurship, technology, and regulatory scrutiny, the eyes of investors and industry observers remain keenly focused on Tesla’s future trajectory.
