JP Morgan says Tesla just undermined Elon Musk's defense against the SEC

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Tesla may have just hurt Elon Musk’s own case in his battle with the SEC, according to J.P. Morgan.

“The now clear incongruence of CEO outlook statements with official company guidance may hurt the perception of management commentary, eroding investor confidence and potentially placing additional pressure on the shares,” J.P. Morgan analyst Ryan Brinkman wrote in a note to clients late Wednesday.

“Full year delivery guidance was stated in the release to have been ‘reaffirmed’ at the prior level of 360,000 to 400,000 units, in our view undermining a key tenet of CEO Elon Musk’s legal defense against the SEC — that his February 19 tweet that Tesla will make around 500,000 vehicles in 2019 was not new information needing pre-approval,” Brinkman said.

Musk is heading to Manhattan Federal Court Thursday to continue his face-off with the U.S. Securities and Exchange Commission, which claims that he violated an earlier settlement deal by posting material information about Tesla on Feb. 19.

At that time, Musk tweeted to his more than 24 million Twitter followers: “Tesla made 0 cars in 2011, but will make around 500k in 2019.”

Tesla shares fell more than 10 percent in premarket trading Thursday morning.

Though the government claims that Musk’s tweet violated his agreement not to post material information without first seeking approval from company lawyers, the CEO has claimed that the information was innocuous and did not need to be vetted. The electric car executive will try to convince the court that he did not violate an October fraud settlement and should not be held in contempt.

But Tesla’s press release Wednesday night may undermine that argument with the latest production updates.

“Despite pull forward of demand from Q1 2019 into Q4 2018 due to the step down in the federal tax credit, US orders for Model 3 vehicles significantly outpaced what we were able to deliver in Q1. We reaffirm our prior guidance of 360,000 to 400,000 vehicle deliveries in 2019,” Tesla announced in a press release Wednesday night.

Said JP Morgan’s Brinkman: “Even if it could be argued that official full year guidance somehow increased from 360,000 ti 400,000 deliveries at the time of the shareholder letter to 350,000 to 500,000 of the Model 3 alone just hours later, to 420,000 to 600,000 total production on February 28 — and now back down to 360,000 to 400,000 deliveries — the choppiness and inconsistency of this communication would still in our view erode investor confidence.”

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