When Musk bids for Twitter his struggle to tweet freely

When Musk bids for Twitter, his struggle to tweet freely hits Snag

Business News / By /

  • PMN business

    • Bloomberg News

    Joel Rosenblatt

    (Bloomberg) – Elon Musk, CEO of Tesla Inc., earned the nickname “Teflon Elon” by successfully fending off multiple legal challenges. However, a recent court ruling suggests his winning streak may be in jeopardy.

    It was revealed last week that a San Francisco judge had found that one of Musk’s 2018 tweets about his company’s privatization was a lie.

    It’s one of at least a dozen high-profile cases involving Tesla or Musk years after he posted the infamous “funding secured” tweet that sent shares skyrocketing and drew the wrath of the US Securities and Exchange Commission.

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    Now, as Musk ramps up his fight to buy Twitter Inc., the lingering effects of his past use of the social media platform may backfire on him.

    The judge’s decision tipped the scales in favor of Tesla investors, who are suing Musk and Tesla over up to $12 billion in trade losses they attribute to the Go Private tweets. The case is scheduled to go before a grand jury in January.

    The decision also poses a threat to Musk’s efforts to free himself from SEC oversight — a quest to find the world’s richest person so personal that he became visibly emotional when he asked the agency last week during a TED conversation in Canada insulted.

    READ ALSO: Elon Musk’s Mystery Twitter Sitter Has A Wild And Crazy Job

    Securities law experts, including Jeffrey Gordon, a professor at Columbia Law School, say the articulate billionaire will find it harder to wriggle out of the “Twitter sitter” — the nickname for the arrangement with him — if he’s branded a liar After years of insisting his tweets were truthful, the SEC that a Tesla official pre-approved what Musk is saying on social media about certain company-related issues, such as production.

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    Musk said in an affidavit in federal court in New York last month that he “never lied to shareholders.”

    That was before US District Judge Edward Chen delivered his verdict in San Francisco, which remains hidden from the public.

    Musk is seeking to appeal the finding, saying in a filing filed Friday that the judge “analyzed the individual phrases of the various tweets and indicated that certain other information should have accompanied the tweets, despite the short-form Twitter medium.” limited the number of characters per tweet.”

    Musk’s attorney, Alex Spiro, did not respond to a request for comment on the SEC fight, which is ongoing in New York. But his response to Chen’s April 16 verdict was defiant.

    “Nothing will ever change the truth, which is that Elon Musk considered taking Tesla private and could have done so,” the attorney said.

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    Gordon said the Tesla CEO didn’t help himself by further defending the tweet.

    “Musk’s subsequent denials in light of Judge Chen’s ruling will further weaken his case against the SEC,” he said.

    Not all securities experts agreed that Chen’s judgment was so potentially damaging. James D. Cox, a professor at Duke Law School, said the SEC faces an uphill battle as it tries to apply a judgment from a San Francisco lawsuit to a New York case involving different parties.

    Going forward, the challenge for the SEC is to regulate high-profile public figures like Musk, who have millions of Twitter followers, and those VIPs who know the potential impact of their statements on capital markets, said Jill E. Fisch, a professor at the University of the Pennsylvania Law School.

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    “Musk is the most recent and visible example of this,” Fisch said. “He probably won’t be the only one.”

    The SEC declined comment.

    Read more: Tesla’s many case files keep lawyers and judges on their toes

    As for Musk’s other legal woes, he’s awaiting a decision any day after a $13 billion lawsuit in Delaware over his role in the electric carmaker’s 2016 acquisition of SolarCity.

    In the San Francisco case, before Chen issued its ruling, Bloomberg Intelligence estimated the lawsuit could settle for between $260 million and $380 million.

    “The price of settlement just went up a lot,” said Adam C. Pritchard, a professor at the University of Michigan Law School. Chen’s decision is a “huge win” for shareholders, and an appeal of the decision by Musk “could be difficult to achieve,” he said.

    Nicholas Porritt, a lawyer representing the shareholders, said he expects Chen’s verdict to be released in the next few days.

    Chen’s ruling means Musk cannot argue to the jury that some key statements in his tweets were true or that he was not fraudulent in making them, Porritt said.

    A pretrial that so thoroughly discredits a defendant in a securities fraud case is “very rare,” Porritt said. “Certainly in no case of similar size to this one has it been preserved.”

    ©2022 Bloomberg LP

    Bloomberg.com

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