Case Western Reserve Law Review·Volume 70·Issue 2·2019
Securities & Exchange Commission vs. Elon Musk & the First Amendment
346
shareholder value.
29
Instead, Musk and Tesla settled with the SEC.
30
In
exchange for allowing him to continue as Tesla’s CEO, Musk forfeited
his First Amendment rights by agreeing to submit his tweets to an
undefined oversight process at Tesla that would ensure the tweets
conformed to SEC speech mandates before their publication.
31
Musk was unrepentant after settling the SEC charges, as reflected
in a tweet in which he derided the SEC for failing to protect Tesla
shareholders from attacks by short-sellers.
32
Musk sarcastically asserted
that the SEC’s acronym actually stands for the “Shortseller Enrichment
Commission” and that it was “doing incredible work” in aiding those
traders.
33
Musk also revealed on national television that no one at Tesla
29. See Irina Ivanova, SEC Fraud Suit Against Elon Musk Threatens to
Unravel Tesla, CBS News (Sept. 28, 2018, 6:38 PM), https://www.cbsnews
.com/news/secs-fraud-suit-against-elon-musk-threatens-to-unravel-tesla/
[https://perma.cc/T6G9-33RA] (describing “investor uncertainty over
Musk's future at the company” and Tesla’s $20 billion loss in market
value since Musk’s August 2018 tweet).
30. Elon Musk Settles SEC Fraud Charge; Tesla Charged With and Resolves
Securities Law Charge, SEC (Sept. 29, 2018), https://www.sec.gov/news/
press-release/2018-226 [https://perma.cc/93Z6-TEVJ].
31. Id. Musk and Tesla each agreed to pay a $20 million fine, which were to
be distributed to shareholders purportedly harmed by Musk’s tweet. Musk
also agreed to resign from his position as chairman of the Tesla board. Id.
32. See generally Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Manning,
136 S. Ct. 1562, 1566 (2015) (describing short-sale transactions). Short
sellers arouse the ire of Musk because they benefit from stock-price
declines that result from, among other things, publication of criticism and
bad news about a public company. See Lawrence Delevingne, Short &
Distort? The Ugly War Between CEOs and Activist Critics, Reuters
(Mar. 21, 2019, 1:07 AM), https://www.reuters.com/article/us-usa-
stocks-shorts-insight/short-distort-the-ugly-war-between-ceos-and-activist-
critics-idUSKCN1R20AW [https://perma.cc/T8CR-NMLT]. Through his
tweets, Musk tried to counter short-sellers of Tesla stock and his critics
in the mainstream media and elsewhere, but he is now muzzled from doing
so by the SEC injunction. See David Ingram, Elon Musk Taunts SEC as
‘Shortseller Enrichment Commission’, NBC News (Oct. 4, 2018, 4:36
PM), https://www.nbcnews.com/tech/tech-news/elon-musk-taunts-sec-
shortseller-enrichment-commission-n916816 [https://perma.cc/N7BJ-Y9L6].
But see Bill Alpert, Tesla CEO Elon Musk is Wrong About Short Sellers,
Barron’s (Oct. 15, 2018), https://www.barrons.com/articles/why-elon-
musk-is-wrong-about-short-sellers-1539384687 [https://perma.cc/U45W-
DPBN] (describing the economic role of short sellers); Jerry W.
Markham & Thomas Lee Hazen, Broker-Dealer Operations Under
Securities and Commodities Laws §§ 9:7, .50, Westlaw (updated Nov.
2018) (describing criticism of the SEC’s prior efforts to curb short selling
and the adverse market effects of those efforts).
33. Tim Higgins & Gabriel T. Rubin, Elon Musk Tweet Mocks the Securities
and Exchange Commission, Wall St. J. (Oct. 4, 2018, 11:50 PM),
https://www.wsj.com/articles/elon-musk-tweet-appears-to-mock-the-
securities-and-exchange-commission-1538685320 [https://perma.cc/