When Elon Musk Tweets, the SEC Chastens

Elon Musk may be brilliant at building disruptive tech companies, but he's equally gifted at disrupting himself on social media. How else to explain his latest rumble with the SEC, which is asking a federal judge to hold him in contempt of court for a tweet that violated his settlement agreement with the agency?

In this segment from MarketFoolery, host Chris Hill and Motley Fool Director of Small-Cap Research Bill Mann discuss the exact nature of this errant tweet, Musk's less-than-ideal response to being called out, Tesla's (TSLA -1.92%) stock price record, and its leadership conundrums.

Check out the latest Tesla earnings call transcript.

A full transcript follows the video.

This video was recorded on Feb. 26, 2019.

Chris Hill: We've got to talk about Musk. And as you pointed out once on Twitter, there's not really a need to say the full name, Elon Musk, because in the business world, how many CEOs are named -- is there another CEO named Musk? Anyway, Elon Musk has a date. The SEC asked a federal judge to hold Musk in contempt of court, saying he violated the settlement that he agreed to last year. Musk then took to the Twitters and wrote, "Something is broken with SEC oversight."

Bill Mann: [laughs] "You want to see some contempt?"

Hill: U.S. District Judge Alison Nathan has come out this morning and said, "You've got until March 11th to explain why you should not be held in contempt of court."

Mann: It was about a tweet. Let's take him at his word, that he wrote, "We're going to produce 500,000 cars in 2019," and then he came back, and he corrected it. As a CEO, he should know that the First Amendment doesn't necessarily apply all the way to him. You have to be careful with what you say. That doesn't seem that bad. But what he's gotten is a Lifetime Achievement Award for the other crazy things that he's said, which, by the way, got the SEC and the court system interested in him and his public offerings in the first place.

Hill: Let's be clear, if Mary Barra, CEO of General Motors, had tweeted something about production in 2019, maybe not she, but certainly --

Mann: The person who's tweeting as Mary Barra? [laughs]

Hill: No, no, the legal department at General Motors. They'd get a phone call from the SEC saying, "Hey, by the way, don't." But, as you said, because of Musk's history, especially because of the settlement agreement last year --

Mann: That's right!

Hill: In some ways, when you're just looking at the stock -- I'm surprised. Maybe I shouldn't be. You tell me if you're surprised. I'm a little surprised that this is a stock that, over the last two years, has traded in a relatively tight range. This is a stock that has basically been in the range of $250 a share to $350 a share. It's visited many places in between those two points.

Mann: Pretty quickly.

Hill: But for the last two years, it's really been in that range.

Mann: It would be amazing to go back to early 2017 Chris and say, "Hey, Chris, by the way, not much is going to happen with Tesla over the next two years."

Hill: The stock.

Mann: The stock. It's amazing that it has not moved that much. Now, it has huge expectations built into the stock price. Maybe those expectations haven't changed that much based on Elon Musk either speaking or not speaking on Twitter. But I can't think of another company that is more dependent upon its CEO, or seemingly more dependent on its CEO, than Tesla is with Elon Musk, particularly since no other executive seems to stay there very long.

Hill: Right. The last time we were talking about Tesla, it was because the chief legal officer had left after just two months. I want to go back to something you said regarding Musk and his importance to this business, and therefore to the stock. I don't think anyone really thinks that the board of directors is going to show him the door. I don't think anyone thinks that's going to happen.

Mann: No.

Hill: Now, that being said, do you think in two to three years, he's still the CEO? I don't see the board showing him the door, but I could see him at some point saying, "I don't need this. I have other things I'm interested in. I'm going to go run my space business."

Mann: It's not going to be up to the board. I think you're exactly right. It will either be up to the SEC or it will be up to Elon Musk. I think it's unfortunate to say, but both of those are going to be based on how he chooses to comport himself in the meantime.