Investor's Corner
Tesla is getting unnecessarily weighed down by the SEC’s claims against Elon Musk
Tesla stock (NASDAQ:TSLA) dropped on Monday after the US Securities and Exchange Commission asked a judge to hold Elon Musk in contempt for reportedly violating a settlement that required him to get approval before releasing any social media posts or announcements that could be material to investors. Regardless of the judge’s decision, Elon Musk and the SEC’s run-ins with each other are adversely affecting investors and unnecessarily weighing down Tesla. This is something is best avoided, by the company and Elon Musk himself, in the future.
According to the SEC, Musk’s tweet on February 19, when he mentioned that Tesla will make “around 500K” vehicles in 2019, was a violation of his settlement with the agency last year. Musk later clarified his statement, explaining that he was talking about an annualized production rate of around 500k (roughly 10k cars per week) vehicles by 2019’s end, but that deliveries for the year are “still estimated to be about 400k.”
Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.
— Elon Musk (@elonmusk) February 20, 2019
The SEC claimed in papers filed in a Manhattan court that Elon Musk “once again published inaccurate and material information about Tesla to his over 24 million Twitter followers, including members of the press, and made this inaccurate information available to anyone with internet access.” The SEC’s announcement adversely affected the company’s stock, sending TSLA plummeting 4% on Monday’s after-hours following the announcement. It did not take long before some of the company’s staunchest critics began to predict that Musk will be incarcerated.
Despite the company’s critics calling for Musk to be sent behind bars, Peter Haveles, a partner at Pepper Hamilton in New York whose practice specializes in commercial and regulatory disputes, noted in a statement to The Verge that another fine will likely be the result of the SEC’s claim against the Tesla CEO.
“Mr. Musk will try to argue that it’s a one-time thing, and the issue will be, is that really the case? Will the SEC come forward with evidence from Tesla that they are struggling to get Mr. Musk to comply with the process? It’s unlikely that Musk will face being barred from serving as a director or officer of a publicly traded company for the tweet,” he said, later adding that Elon Musk’s tweet doesn’t rise to the level of criminal contempt; and thus, the CEO does not have to worry about jail time.
Nevertheless, it should be noted that while the SEC might be a bit aggressive with its request to have the CEO held in contempt of court due to his February 19 tweet, Musk could have avoided the entire issue altogether if he had just been more careful. And it’s not like this is the first time such a thing happened either, as it was his Twitter activities that landed him in hot water last year due to his now infamous “funding secured” announcement.
It will likely be difficult for the SEC to prove that Elon Musk’s tweets were a violation of his settlement’s terms. For one, Musk’s February 19 tweet was made while markets were closed. Thus, it will be very challenging to gauge the “materiality” of the announcement. Musk also mentioned the same figures weeks before during the Q4 2019 earnings call, when he estimated that Tesla could produce “maybe in the order of 350,000 to 500,000 Model 3s” this year. Musk mentioned this in a later tweet, stating that the SEC seemed to have forgotten to read the transcript of Tesla’s Q4 earnings call.
SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing … 🤗
— Elon Musk (@elonmusk) February 26, 2019
It is difficult to not see a certain bias emerging from the SEC against Musk’s Twitter activities, considering that the tweet in question did not really affect Tesla stock and the estimate was already public knowledge due to the fourth quarter earnings call. In a way, it almost seems like the SEC’s recent initiative against Musk is response of sorts against the CEO’s statements against the agency. Musk has mocked the agency on Twitter in the past, dubbing it as the “Shortseller Enrichment Commission,” and in a 60 Minutes segment, he flat-out admitted that he does not respect the SEC. Ultimately, the SEC’s claim would have to rely on the premise of Elon Musk posting his Tesla-related tweet without the message being vetted first, as agreed upon in last year’s settlement.
Tesla is at a point in its history where the company could grow into one of the most potent forces in the auto industry. With Model 3 production stabilized, Gigafactory 3 under construction, and vehicles like the Model Y set to be revealed, tweets like Musk’s February 19 announcement are things that the company can do without. If led by a more careful, more calculating Elon Musk, Tesla’s inevitable rise to power will most definitely happen sooner than expected.
As of writing, Tesla shares are trading -3.52 at $288.25 per share on Tuesday’s pre-market.
Disclosure: The opinions presented in this article are the author’s alone, and do not necessarily reflect the stand of Teslarati. I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
There are a lot of Tesla bulls out there who have astronomical expectations for the company, especially as its arm of reach has gone well past automotive and energy and entered artificial intelligence and robotics.
However, some of the most bullish Tesla investors believe the company could become worth $100 trillion, and CEO Elon Musk does not believe that number is completely out of the question, even if it sounds almost ridiculous.
To put that number into perspective, the top ten most valuable companies in the world — NVIDIA, Apple, Alphabet, Microsoft, Amazon, TSMC, Meta, Saudi Aramco, Broadcom, and Tesla — are worth roughly $26 trillion.
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Cathie Wood of ARK Invest believes the number is reasonable considering Tesla’s long-reaching industry ambitions:
“…in the world of AI, what do you have to have to win? You have to have proprietary data, and think about all the proprietary data he has, different kinds of proprietary data. Tesla, the language of the road; Neuralink, multiomics data; nobody else has that data. X, nobody else has that data either. I could see $100 trillion. I think it’s going to happen because of convergence. I think Tesla is the leading candidate [for $100 trillion] for the reason I just said.”
Musk said late last year that all of his companies seem to be “heading toward convergence,” and it’s started to come to fruition. Tesla invested in xAI, as revealed in its Q4 Earnings Shareholder Deck, and SpaceX recently acquired xAI, marking the first step in the potential for a massive umbrella of companies under Musk’s watch.
SpaceX officially acquires xAI, merging rockets with AI expertise
Now that it is happening, it seems Musk is even more enthusiastic about a massive valuation that would swell to nearly four-times the value of the top ten most valuable companies in the world currently, as he said on X, the idea of a $100 trillion valuation is “not impossible.”
It’s not impossible
— Elon Musk (@elonmusk) February 6, 2026
Tesla is not just a car company. With its many projects, including the launch of Robotaxi, the progress of the Optimus robot, and its AI ambitions, it has the potential to continue gaining value at an accelerating rate.
Musk’s comments show his confidence in Tesla’s numerous projects, especially as some begin to mature and some head toward their initial stages.
Elon Musk
Tesla director pay lawsuit sees lawyer fees slashed by $100 million
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
The Delaware Supreme Court has cut more than $100 million from a legal fee award tied to a shareholder lawsuit challenging compensation paid to Tesla directors between 2017 and 2020.
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
Delaware Supreme Court trims legal fees
As noted in a Bloomberg Law report, the case targeted pay granted to Tesla directors, including CEO Elon Musk, Oracle founder Larry Ellison, Kimbal Musk, and Rupert Murdoch. The Delaware Chancery Court had awarded $176 million to the plaintiffs. Tesla’s board must also return stock options and forego years worth of pay.
As per Chief Justice Collins J. Seitz Jr. in an opinion for the Delaware Supreme Court’s full five-member panel, however, the decision of the Delaware Chancery Court to award $176 million to a pension fund’s law firm “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board.
The justices then reduced the fee award from $176 million to $70.9 million. “As we measure it, $71 million reflects a reasonable fee for counsel’s efforts and does not result in a windfall,” Chief Justice Seitz wrote.
Other settlement terms still intact
The Supreme Court upheld the settlement itself, which requires Tesla’s board to return stock and options valued at up to $735 million and to forgo three years of additional compensation worth about $184 million.
Tesla argued during oral arguments that a fee award closer to $70 million would be appropriate. Interestingly enough, back in October, Justice Karen L. Valihura noted that the $176 award was $60 million more than the Delaware judiciary’s budget from the previous year. This was quite interesting as the case was “settled midstream.”
The lawsuit was brought by a pension fund on behalf of Tesla shareholders and focused exclusively on director pay during the 2017–2020 period. The case is separate from other high-profile compensation disputes involving Elon Musk.
Investor's Corner
Tesla (TSLA) Q4 and FY 2025 earnings call: The most important points
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Tesla’s (NASDAQ:TSLA) Q4 and FY 2025 earnings call highlighted improving margins, record energy performance, expanding autonomy efforts, and a sharp acceleration in AI and robotics investments.
Executives, including CEO Elon Musk, discussed how the company is positioning itself for growth across vehicles, energy, AI, and robotics despite near-term pressures from tariffs, pricing, and macro conditions.
Key takeaways
Tesla reported sequential improvement in automotive gross margins excluding regulatory credits, rising from 15.4% to 17.9%, supported by favorable regional mix effects despite a 16% decline in deliveries. Total gross margin exceeded 20.1%, the highest level in more than two years, even with lower fixed-cost absorption and tariff impacts.
The energy business delivered standout results, with revenue reaching nearly $12.8 billion, up 26.6% year over year. Energy gross profit hit a new quarterly record, driven by strong global demand and high deployments of MegaPack and Powerwall across all regions, as noted in a report from The Motley Fool.
Tesla also stated that paid Full Self-Driving customers have climbed to nearly 1.1 million worldwide, with about 70% having purchased FSD outright. The company has now fully transitioned FSD to a subscription-based sales model, which should create a short-term margin headwind for automotive results.
Free cash flow totaled $1.4 billion for the quarter. Operating expenses rose by $500 million sequentially as well.
Production shifts, robotics, and AI investment
Musk further confirmed that Model S and Model X production is expected to wind down next quarter, and plans are underway to convert Fremont’s S/X line into an Optimus robot factory with a capacity of one million units.
Tesla’s Robotaxi fleet has surpassed 500 vehicles, operating across the Bay Area and Austin, with Musk noting a rapid monthly expansion pace. He also reiterated that CyberCab production is expected to begin in April, following a slow initial S-curve ramp before scaling beyond other vehicle programs.
Looking ahead, Tesla expects its capital expenditures to exceed $20 billion next year, thanks to the company’s operations across its six factories, the expansion of its fleet expansion, and the ramp of its AI compute. Additional investments in AI chips, compute infrastructure, and future in-house semiconductor manufacturing were discussed but are not included in the company’s current CapEx guidance.
More importantly, Tesla ended the year with a larger backlog than in recent years. This is supported by record deliveries in smaller international markets and stronger demand across APAC and EMEA. Energy backlog remains strong globally as well, though Tesla cautioned that margin pressure could emerge from competition, policy uncertainty, and tariffs.
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