As Musk Bids For Twitter, His Fight to Tweet Freely Hits Snag

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(Bloomberg) — Tesla Inc. CEO Elon Musk earned the nickname “Teflon Elon” by efficiently preventing off a number of authorized challenges. But a current court docket ruling suggests his run of private victories could also be endangered.

Last week, it was revealed {that a} San Francisco choose had decided that one in every of Musk’s 2018 tweets about taking his firm personal was a lie. 

It’s one in every of at the very least a dozen high-profile circumstances that Tesla or Musk are concerned in years after he posted the notorious “funding secured” tweet, sending shares hovering and welcoming the wrath of the U.S. Securities and Exchange Commission.

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Now, as Musk ramps up his battle to purchase Twitter Inc., the lingering ramifications of his prior use of the social media platform could come again to hang-out him.

The choose’s choice suggestions the scales closely in favor of Tesla traders who’re suing Musk and Tesla for as a lot as $12 billion in buying and selling losses they blame on the go-private tweets. That case is ready for a jury trial in January.

The choice additionally poses a menace to Musk’s effort to unleash himself from oversight by the SEC — a quest so private for the world’s richest person who he grew to become visibly emotional whereas lambasting the company throughout a TED speak in Canada final week.

Read More: Elon Musk’s Mystery Twitter Sitter Has One Wild and Crazy Job

Securities legislation specialists together with Columbia Law School professor Jeffrey Gordon say that being dominated a liar after years of insisting his tweets had been truthful will make it more durable for the voluble billionaire to wriggle out from beneath the “Twitter Sitter” — the moniker for the association with the SEC {that a} Tesla official pre-approve what Musk says on social media about sure company-related subjects, like manufacturing.

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Musk mentioned in a sworn assertion in New York federal court docket final month that he “by no means lied to shareholders.” 

That was earlier than U.S. District Judge Edward Chen in San Francisco issued his ruling, which stays sealed from public view. 

Musk is making an attempt to attraction the discovering, saying in a submitting Friday that the choose “parsed the person phrases of the assorted tweets and indicated sure different data ought to have accompanied the tweets, although the short-form Twitter medium limits the variety of characters per tweet.”

Musk’s lawyer, Alex Spiro, didn’t reply to a request for touch upon the SEC struggle, which is ongoing in New York. But his response to Chen’s ruling on April 16 was defiant.

“Nothing will ever change the reality, which is that Elon Musk was contemplating taking Tesla personal and will have,” the legal professional mentioned. 

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Gordon mentioned the Tesla CEO isn’t serving to himself by persevering with to defend the tweet.

“Musk’s subsequent denialism within the face of Judge Chen’s ruling will additional weaken his case in opposition to the SEC,” he mentioned.

Not all securities specialists agreed Chen’s ruling was so doubtlessly damaging. James D. Cox, a professor at Duke Law School, mentioned the SEC faces an uphill struggle making an attempt to apply a ruling from a San Francisco lawsuit to a New York case involving completely different events. 

Going ahead, the problem going through the SEC is how to regulate high-profile public figures like Musk with tens of millions of Twitter followers, with these VIPs realizing the potential impression of their statements on capital markets, mentioned Jill E. Fisch, a professor on the University of Pennsylvania Law School. 

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“Musk is the present and most seen instance of this,” Fisch mentioned. “He’s unlikely to be the one one.”

The SEC declined to remark.

Read More: Tesla’s Many Dockets of Litigation Keep Lawyers and Judges Busy

As for Musk’s different authorized woes, he’s awaiting a ruling any day following a $13 billion trial in Delaware over his function within the electric-car maker’s 2016 buyout of SolarCity. 

In the San Francisco case, Bloomberg Intelligence estimated earlier than Chen issued his ruling that the lawsuit may accept between $260 million and $380 million.

“The value of settlement simply went means up,” mentioned Adam C. Pritchard, a professor on the University of Michigan Law School. Chen’s ruling was a “big win” for shareholders and an attraction of the choice by Musk “is perhaps laborious to come by,” he mentioned. 

Nicholas Porritt, a lawyer representing shareholders, mentioned he expects Chen’s ruling will change into public within the subsequent few days. 

Chen’s choice implies that Musk gained’t find a way to argue to jurors that some key statements in his tweets had been true, or that he didn’t act fraudulently when he made them, Porritt mentioned.

A pretrial ruling that so completely discredits a defendant in a securities fraud case is “very uncommon,” Porritt mentioned. “Certainly it has not been obtained in any case of comparable measurement to this one.”

©2022 Bloomberg L.P.

Bloomberg.com

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