Coupled with malaise in broader markets, investors have had to weigh legal issues for Musk, as well as the possibility that his Twitter acquisition could be a distraction from running the world’s most valuable automaker.
The Wall Street Journal reported Wednesday that US securities regulators are investigating Musk’s belated disclosure that he has bought more than 5% of Twitter’s stock. Musk now owns more than 9% of the San Francisco company.
The SEC declined to comment and a message was left for Musk’s lawyer.
A lawsuit filed last month by some Twitter shareholders alleges that Musk’s stake hit 5% on March 14, so he would have to file forms with the SEC to disclose this by March 24. Instead, Musk didn’t make the required disclosure until April 4, hurting less wealthy investors who sold Twitter stock in the nearly two weeks before he disclosed his stake and raised the price, the lawsuit claims.
Also, on Wednesday, a federal judge in California handed a group of Tesla shareholders a big win, foiling his ruling that Musk falsely and recklessly tweeted in 2018 that he had secured the funding to take Tesla private when the agreement was not final. The tweets pushed Tesla’s share price higher at the time.
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The ruling means jurors in a shareholder lawsuit will begin knowing that the judge ruled that Musk’s tweets were fake.
At the time of the August 7, 2018 tweets, Musk was in talks with the Saudi Public Investment Fund to finance the deal. But Judge Edward Chen ruled it wasn’t final when Musk tweeted, “I’m thinking about taking private Tesla for $ 420. Secured financing.”
Chen wrote that there was “nothing concrete” about funding from the Public Investment Fund and that the discussions were clearly preliminary.
“There had been no discussion of what the purchase price for a share of the shares would be. Nor was there any discussion of what percentage of the company the PIF would own or the total amount of money the PIF would contribute. “Chen wrote in his sentence.
Musk’s attorneys asked Chen to reconsider, claiming he was unaware of cases where a court took similar issues out of the hands of a jury “in which the statements were ambiguous at best and were made in limited context. and informal Twitter post. ”
In August 2018, the tweets have already caused legal problems for Musk. The SEC filed a stock fraud allegation, which Musk and Tesla resolved in 2018. Each agreed to pay a $ 20 million fine and that a firm’s attorney would review any tweets from Musk that might affect the price. of actions. The SEC is investigating whether Musk has violated this requirement.
Musk recently lost an offer to have the deal rejected on the grounds that it violated his First Amendment rights to free speech.
Since Musk made his offer of $ 54.20 per share for the public Twitter purchase on April 14, the stock is priced exactly the same: $ 45.08. Analysts say it’s an indication of investor skepticism that the deal will go through even if Musk has the funding lined up. Twitter shares are up 4.3% year to date.
Shares of Tesla, however, are down 26% since offering on April 14, in part on fears that Musk will be distracted when Tesla, which is based in Austin, Texas, opens two new factories and takes care of the problems. of the supply chain. Stocks have plummeted more than 30% so far this year.