Tesla’s Elon Musk, facing contempt charges, says semi-secret meeting was a mistake


Tesla Chief Executive Elon Musk, who is scheduled to defend himself Monday against contempt charges in a federal district court, may find his defense complicated by a semi-secret teleconference Tesla held Thursday with a small number of investors and members of the media.

During the call, in which a cheaper version of the Model 3 electric sedan was announced, Musk said the company would be closing its retail stores and that it would not, as originally forecast, post a profit for the current quarter. Participants were told not to post recordings of the proceedings, and after the meeting Tesla said a recording or transcript of the meeting would not be made available to the media or the general public.


Short sellers and Tesla critics immediately claimed the meeting violated U.S. Securities and Exchange Commission rules governing disclosure of material information.

(A Tesla spokesman said the company posted the Model 3 news on its website shortly before the teleconference began. Tesla posted a recording of the event on Wednesday morning.)

After a leaked transcript was made public online, even some of Tesla’s most ardent supporters began to complain.

“Yo,” vocal Tesla fan and shareholder Galileo Russell tweeted on Tuesday. “Why was there a press call about the $35K model 3 that was closed to the public (and shareholders!!) w/ no transcript released. super frustrating for long-term supporters. Completely goes against democratization of information and financial markets.”

An analyst at Deutsche Bank said Tesla had shared information with him about Model 3 profit margins, even though Musk refused to answer a question about margins on the media conference call.

Musk responded with a tweet of his own: “Tesla comms is fixing. That was a mistake.”

Because the material information Musk released at the meeting was widely and quickly dispersed by the media, University of Delaware finance professor Charles Elson said, the event did not necessarily violate the SEC disclosure rules, also known as Regulation FD. “I’m not saying whether it’s a violation or not, but any controversy on Reg FD doesn’t help in a contempt hearing,” he said.


By Monday, Musk must file his defense against contempt charges leveled against him by the SEC. The agency said Musk violated terms of a fraud settlement reached in September that put restrictions on Musk’s use of Twitter to communicate material information about Tesla — information likely to affect the company’s stock price.

The SEC said Musk failed to have a Feb. 19 tweet approved by a company attorney as required. The tweet claimed Tesla would make “around 500,000 cars this year.” The statement was not true, and the Bel-Air billionaire corrected it a few hours later, cutting his forecast by 100,000 cars.

The original fraud charges stemmed from Musk’s claim, delivered in August by tweet, that funding had been secured for an $80-billion deal to take Tesla private. No such deal had been struck.

Meanwhile, Tesla’s largest outside investor, asset management firm Baillie Gifford, told Barron’s it’s OK if Musk steps down as CEO. “We wouldn’t be against him having a different role,” said James Anderson, head of global equities for Baillie Gifford. “I don’t think he needs to be CEO.”

Adding to the turmoil, Tesla retail stores are being closed and employees laid off as Musk moves to online-only car sales. The San Jose Mercury News reported Tuesday that at least 81 workers will soon be laid off at the company’s Fremont, Calif., assembly plant.

The manager of a Tesla retail store in California, who asked that his name not be used because he feared retaliation, said his store is still open while employees wait for more bad news.


“They’ve cut our commissions,” he said. “Everyone thinks the company wants us to quit so they don’t have to lay us off and pay severance.”

Once a huge fan of Tesla — “I thought this would be my lifelong career” — he said he began to sour on the company early last year. “There wasn’t any turning point. Tesla is a death-by-a-thousand-cuts kind of company.”

On the positive side, he said, the job will look good on his resume. He can, he said, tell prospective employers, “You guys are not going to give me a harder time than Tesla gave me.”

Tesla’s stock price closed down 3.1% on Tuesday, at $276.54.

Twitter: @russ1mitchell