Tesla Inc. CEO Elon Musk on March 11 refuted the SEC's claim that his Feb. 19 tweet violated a September 2018 fraud settlement and said he should not be held in contempt.
In a court filing, Musk and his legal team said Tesla's disclosure counsel reviewed the executive's tweet shortly after it was posted. The counsel decided that the company does not view the tweet as material and that it does not require pre-approval.
Musk's lawyers added that the tweet "did not cause any notable move in Tesla's stock price in the after-hours market and was plainly not material to shareholders."
They also noted that following the settlement with the SEC, Musk "diligently attempted" to comply with the settlement orders "in a reasonable manner." Musk's lawyers said the executive has "significantly altered" his communication, especially on Twitter, in a bid to adhere with the agreement.
"I have dramatically decreased the amount that I tweet about Tesla … I have cut my average monthly Tesla-related tweets nearly in half," Musk said in a statement.
In addition, Musk's legal team also highlighted "significant constitutional concerns" in the way the SEC interpreted the 2018 court order. His lawyers urged the court to reject the SEC's "invitation to trample" Musk's freedom of speech.
The SEC took Musk to court in September 2018 over tweets in which he allegedly misled investors by announcing that he will take Tesla private in a $420-per-share deal. The SEC reached settlement agreements with Musk and Tesla two days later, costing Musk and Tesla a combined $40 million in penalties, Musk's chairmanship and the appointment of two new independent directors.
After Musk's tweet on Feb. 19, the SEC asked a federal court to hold Musk in contempt, saying the post violates the settlement they signed last year.
Tesla's shares closed up 2.39% at $290.92 on March 11.