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."
Tesla shares initially fell at the open before reversing and heading higher.
Here's what five 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 CNBC's "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?"
- Leon Cooperman, the billionaire founder of Omega Advisors, also says Musk should be less outspoken, though not for the sake of the SEC. "If I was an investor in Tesla, I would be very worried about his deportment," he said on "The Exchange." "The SEC is very wrong-minded in what they do. They're abusive in their conduct. He's got to behave like an adult. [...] He's better off just keeping to himself, and I think that most intelligent and sane people would recognize his brilliance, but he's undermining himself. It's a little bit like the president, in a sense."
- Bernstein analyst Toni Sacconaghi says instances like these — including Musk's now infamous tweet about taking Tesla private — may derail the stock in the near term, but not necessarily over the long haul. "We believe that they're showing increasingly that they can make these cars profitably, and ... that makes us feel modestly better about the stock longer term. But the near-term stuff, quite frankly, is a sideshow, I think, for a fundamental investor," he said on "Halftime Report," adding that the stock's fluctuations are "volatility that, as a Tesla investor, you have to accept." He also argued that ousting Musk would be a "major setback" that could cause a double-digit percent decline in Tesla's stock. "What's more likely is the board thinking about, 'Should we ... get a COO in and put [Musk] in as president and head of product development or something like that and severely curtail his Twitter usage?'" Sacconaghi said. "That could be a positive impact, quite frankly, that comes out of this."
- 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 "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."