As Tesla CEO Elon Musk bids for Twitter, his fight to tweet freely hits snag
TESLA, INC. Chief Executive Officer (CEO) Elon Musk earned the nickname “Teflon Elon” by successfully fighting off multiple legal challenges. But a recent court ruling suggests his run of personal victories may be endangered.
Last week, it was revealed that a San Francisco judge had determined that one of Mr. Musk’s 2018 tweets about taking his company private was a lie.
It’s one of at least a dozen high-profile cases that Tesla or Musk are involved in years after he posted the infamous “funding secured” tweet, sending shares soaring and inviting the wrath of the US Securities and Exchange Commission.
Now, as Mr. Musk ramps up his battle to buy Twitter, Inc., the lingering ramifications of his prior use of the social media platform may come back to haunt him.
The judge’s decision tips the scales heavily in favor of Tesla investors who are suing Mr. Musk and Tesla for as much as $12 billion in trading losses they blame on the go-private tweets. That case is set for a jury trial in January.
The decision also poses a threat to Mr. Musk’s effort to unleash himself from oversight by the SEC — a quest so personal for the world’s richest person that he became visibly emotional while lambasting the agency during a TED talk in Canada last week.
Securities law experts including Columbia Law School professor Jeffrey Gordon say that being ruled a liar after years of insisting his tweets were truthful will make it harder for the voluble billionaire to wriggle out from underneath the “Twitter Sitter” — the moniker for the arrangement with the SEC that a Tesla official pre-approve what Mr. Musk says on social media about certain company-related topics, like production.
Mr. Musk said in a sworn statement in New York federal court last month that he “never lied to shareholders.”
That was before US District Judge Edward Chen in San Francisco issued his ruling, which remains sealed from public view.
Mr. Musk is trying to appeal the finding, saying in a filing Friday that the judge “parsed the individual phrases of the various tweets and indicated certain other information should have accompanied the tweets, even though the short-form Twitter medium limits the number of characters per tweet.”
Mr. Musk’s lawyer, Alex Spiro, didn’t respond to a request for comment on the SEC fight, which is ongoing in New York. But his response to Mr. Chen’s ruling on April 16 was defiant.
“Nothing will ever change the truth, which is that Elon Musk was considering taking Tesla private and could have,” the attorney said.
Mr. Gordon said the Tesla CEO isn’t helping himself by continuing to defend the tweet.
“Musk’s subsequent denialism in the face of Judge Chen’s ruling will further weaken his case against the SEC,” he said.
Not all securities experts agreed Mr. Chen’s ruling was so potentially damaging. James D. Cox, a professor at Duke Law School, said the SEC faces an uphill fight trying to apply a ruling from a San Francisco lawsuit to a New York case involving different parties.
Going forward, the challenge facing the SEC is how to regulate high-profile public figures like Musk with millions of Twitter followers, with these VIPs knowing the potential impact of their statements on capital markets, said Jill E. Fisch, a professor at the University of Pennsylvania Law School.
As for Mr. Musk’s other legal woes, he’s awaiting a ruling any day following a $13-billion trial in Delaware over his role in the electric carmaker’s 2016 buyout of Solar City.
In the San Francisco case, Bloomberg Intelligence estimated before Mr. Chen issued his ruling that the lawsuit could settle for between $260 million and $380 million.
Nicholas Porritt, a lawyer representing shareholders, said he expects Mr. Chen’s ruling will become public in the next few days.
Mr. Chen’s decision means that Mr. Musk won’t be able to argue to jurors that some key statements in his tweets were true, or that he didn’t act fraudulently when he made them, Porritt said.
A pretrial ruling that so thoroughly discredits a defendant in a securities fraud case is “very rare,” Mr. Porritt said. “Certainly it has not been obtained in any case of similar size to this one.”