Musk gets reprieve in securities case over his tweets

A two-week ceasefire to set things straight may be just what Elon Musk needs to end a contentious scuffle with the U.S. Securities and Exchange Commission though he might want to log off Twitter in the meantime.

The SEC requested sanctions earlier this month for one of Musk's tweets in which he claimed Tesla Inc. was on track to produce 500,000 cars in 2019, a claim the SEC says violates the terms of a settlement agreement between the parties.

That settlement agreement was itself the product of a prior tweet-based dispute between the SEC and Musk in August, involving Musk's claim Tesla's stock prices were "locked" at $420. He later said the tweet was a marijuana reference intended to impress his girlfriend.

The latest apparent Twitter faux pas occurred in spite of a requirement within the agreement obligating Musk to prescreen written communications containing potentially material company information. Musk disputed the alleged violation, claiming the pre-screening requirement was significantly narrowed over the course of settlement negotiations and would not apply.

U.S. District Judge Alison Nathan of the Southern District of New York was slated to rule on the contempt charge on Thursday. But she deferred ruling on the request for two weeks to allow the parties more time to settle their differences.

In a post-hearing press scrum, Musk praised Nathan and her decision to defer the ruling. Marc Leaf, a securities attorney and partner Drinker Biddle & Reath LLP not involved in the case, said Musk has good reason to celebrate.

"The judge didn't try to interfere with the nitty gritty about the policies and procedures they'd have to have in place to make sure that Musk's tweets comply with the law," Leaf said.

Musk's tweets have made him a target of his own investor-backed class action, with a complaint filed in Delaware earlier this month and more recently transferred to the Central District of California. But if he can comply with all the terms of the settlement, he'll make it out of the chaos largely unscathed, Leaf said.

"It's good news for Musk and Tesla. It's pretty clear that Musk took this seriously. I'm pretty optimistic things are going to go work out for him and Tesla," Leaf said. "I think he got his mulligan. But that's the last one he gets."

In the two weeks until the next hearing, Leaf said, whoever is in charge of corporate governance at Tesla should keep a close eye on Musk's thumbs.

"The Board of Directors at Tesla should be taking this more seriously. They should tell him, 'Look, you're a genius, you're a visionary, but we need you to stop this.'" Leaf said. "'We need you to give up your phone.'"