For Jack Dorsey to support Elon Musk’s Twitter proposal, time is running short
Elon Musk, the CEO of Tesla Inc., gained the moniker “Teflon Elon” after successfully overcoming various legal obstacles. However, a recent court decision signals that his string of personal successes may be in jeopardy.
A San Francisco court ruled last week that one of Musk’s 2018 tweets about taking his firm private was a falsehood.
It’s one of at least a dozen high-profile lawsuits involving Tesla or Musk in the years since he sent the notorious “funding secured” tweet, which sent shares skyrocketing and drew the fury of the US Securities and Exchange Commission.
Now, as Musk intensifies his bid to acquire Twitter Inc., the repercussions of his previous usage of the social media network might come back to haunt him.
The judge’s ruling favours Tesla investors, who are suing Musk and Tesla for up to $12 billion in trading losses they attribute to Musk’s go-private tweets. In January, a jury trial will be held in that case.
Musk’s drive to free himself from SEC scrutiny, which has become so personal for the world’s richest man that he grew physically upset when lambasting the agency during a TED conference in Canada last week, is also jeopardised by the ruling.
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According to securities law experts, including Columbia Law School professor Jeffrey Gordon, being found a liar after years of claiming his tweets were truthful will make it more difficult for Musk to get out from under the “Twitter Sitter” — the term for the SEC agreement that requires a Tesla official to pre-approve what Musk says on social media about certain company-related topics, such as production.
Musk claimed he “never misled to shareholders” in a sworn declaration filed in federal court in New York last month.
That was before U.S. District Judge Edward Chen of San Francisco published his decision, which is still sealed.
Musk is attempting to overturn the decision, claiming in a Friday filing that the court “parsed the particular sentences of the numerous tweets and stated certain further information should have accompanied the tweets, notwithstanding the short-form Twitter medium’s character restriction.”
Musk’s lawyer, Alex Spiro, has yet to reply to a request for comment on the continuing SEC case in New York. On the other hand, his reaction to Chen’s verdict on April 16 was belligerent.
“Nothing will ever change the fact,” the attorney stated, “which is that Elon Musk was considering and could have taken Tesla private.”
The Tesla CEO, according to Gordon, isn’t helping himself by defending the post.
“Musk’s subsequent denial in the face of Judge Chen’s judgement will undermine his case against the SEC even further,” he added.
Not everyone thought that Chen’s decision was so potentially detrimental. According to James D. Cox, a professor at Duke Law School, the SEC will have a difficult time applying a finding from a San Francisco litigation to a case involving different parties in New York.
According to Jill E. Fisch, a professor at the University of Pennsylvania Law School, the SEC’s next problem will be regulating high-profile public individuals like Musk, who have millions of Twitter followers and are aware of the potential impact of their words on financial markets.
“Musk is the most visible and current example of this,” Fisch said. “He’s not the only one,” says the narrator.
The Securities and Exchange Commission (SEC) declined to comment.
More: Tesla’s Multiple Litigation Dockets Keep Lawyers and Judges Busy
Regarding Musk’s other legal issues, he is awaiting a decision in a $13 billion trial in Delaware for his participation in Tesla’s 2016 acquisition of SolarCity.
Before Chen made his judgement in the San Francisco case, Bloomberg Intelligence predicted that the lawsuit may be settled for between $260 million and $380 million.
According to Adam C. Pritchard, a professor at the University of Michigan Law School, “the price of settlement simply shot significantly up.” Chen’s decision was a “major success” for investors, and an appeal was filed.
A lawyer representing shareholders, Nicholas Porritt, believes Chen’s decision will be made public in the coming days.
According to Porritt, Chen’s ruling implies Musk will be unable to persuade jurors that several important assertions in his tweets were accurate or that he did not behave illegally when he wrote them.
Porritt described a preliminary judgement that completely discredits a defendant in a securities fraud prosecution as “extremely uncommon.” “It hasn’t been acquired in any case of comparable scale to this one.”