Shares in Tesla plunged 7% in extended trading Wednesday after the company reported a massive sales drop. And more bad news could be ahead as Elon Musk, Tesla’s CEO, faces a court hearing on Thursday in his Twitter dispute with the SEC.
About 63,000 vehicles were delivered to customers in the first three months of 2019 — a 31% drop compared to the prior quarter. The total sales figures included about 50,900 Model 3 sedans, Tesla’s best-selling vehicle, and 12,100 luxury Model S sedans and Model X SUVs.
The sales figures do not come as a shock.
Wall Street analysts expected sales and deliveries of the Model 3 to be about 50,000. And Tesla had already said it expected Model S and Model X deliveries to be lower than they were a year earlier. The company said it’s confident it will reach its annual sales goal.
Musk vs. SEC
A federal judge in New York will hear oral arguments today in a lawsuit brought by the US Securities and Exchange Commission that seeks to hold Musk in contempt for violating a settlement deal.
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The hearing is scheduled for 2 pm ET at a Manhattan courtroom. It’s unclear whether Musk will be present.
Judge Alison Nathan is tasked with weighing the SEC’s request that Musk be held in contempt for violating a settlement agreement reached last year. The agreement required Musk to get pre-approval for social media posts about the electric car company. It is unclear when Nathan will issue a ruling.
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If she sides with regulators, Musk could face another hefty fine and further limits to his social media use. The judge could oust Musk from the CEO seat, although she is not expected to rule that harshly. Nathan could also toss out the settlement with the SEC, effectively reopening the agency’s litigation against Musk and Tesla.
The SEC claims Musk violated its 2018 settlement deal when he said in a February 19 tweet that Tesla will make around 500,000 cars in 2019. Hours later, he posted another tweet that said the company will actually deliver 400,000 cars this year.
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Although Musk corrected his mistake, regulators said he had “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers,” according to court papers. Musk has denied wrongdoing and accused the SEC of trying to stifle free speech.
Tesla had agreed to establish a board committee to oversee Musk’s posts. In a court filing, Tesla conceded Musk did not receive pre-approval from anyone on that committee for his February posts, but the company has since claimed that he didn’t need it.
Musk’s standoff with the SEC started last year when he claimed in a tweet that he was “considering” taking Tesla private at $420 a share and that he had secured funding for the deal. That sent Tesla’s stock surging.
But the SEC later said funding was not, in fact, secured. A settlement deal reached in October saddled Musk and Tesla with $40 million in fines and required Musk to step down as the company’s chairman, though he retained the role of CEO.
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