Tesla CEO Elon Musk is once again at odds with the Securities and Exchange Commission, and experts say the conflict could exacerbate Tesla's stock losses.
On Monday the SEC asked a judge to hold Musk in contempt, alleging he violated a settlement deal that bans him from tweeting about the business without preapproval. The watchdog agency cited a Feb. 19 tweet from Musk that said his automaker would make "around" 500,000 vehicles in 2019, which he later clarified.
"Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week," Musk wrote on Twitter. "Deliveries for year still estimated to be about 400k."
On Tuesday, Musk hit back, calling the SEC "broken."
"Something is broken with SEC oversight," the CEO wrote on Twitter.
Tesla shares initially fell at the open before reversing and heading higher.
Here's what three market experts think could be ahead for the company:
- CNBC's Jim Cramer says Musk is playing a dangerous game by chastising the SEC. "Historically, when you have a lawyer and you're involved with the SEC, your lawyer says, 'Listen, here's the thing you must never do: You must never antagonize the SEC,'" he said on "Squawk on the Street." "What they do is they call down the outside directors and they say, 'Hey, guys, we're done with that CEO. Which one of you wants to step up to be CEO?' Now, I don't think people realize this, but that's the way it works. [...] What does he think he is, the president?"
- Harvey Pitt, former chairman of the SEC and current CEO of consulting firm Kalorama Partners, sides with the agency. "There's a fundamental problem here: Musk is a creative genius. I don't think anybody would deny that. Therefore, he has real value to the company. On the other hand, he does not function the way a normal CEO should function. There has to be something that represses this instinctive drive to put things out on Twitter and just give in to his every thought and emotion that comes into his head," he told CNBC's "Squawk Box." "At least what the SEC is trying to do is get the judge to focus on the fact that unless something is put in place now, he's just going to keep on doing this and cost the shareholders huge amounts of money."
- Colin Rusch, managing director at Oppenheimer, sees more "gray area" when it comes to how this affects Tesla's out-years. "I'm not sure a judge will come down, but what I do think is going to happen is they're going to make sure [Musk] understands that he can't be tweeting out ... potentially fuzzy information like this," he said on "Squawk Box," adding that Tesla's next hurdle will be fielding competition from other automakers. "Some of these other vehicles ... coming out in 2021, 2022 is really where we see real competition for Tesla, and we're going to give them the benefit of the doubt."
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