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By: Matt Jones
Elon Musk recently tweeted his plan to take Tesla private at $420/share. He even went so far to say “Funding secured.” Such a tweet was of course met with a mix of emotions and responses. Once that news hit the market, Tesla shares soared approximately 11%. The tweet itself seems harmless on its face; a CEO was simply stating potential plans for his company. But if you look deeper, there may be potential legal implications. Specifically, did Musk’s tweet violate any securities regulations, such as regarding fair disclosure? The regulations prohibit selective disclosure of material information. But does the information contained in Musk’s tweet equate to material information? The tweet itself is not likely per se unlawful, but Musk may run into legal troubles if it turns out the funding is not secured, as it may be viewed as misleading the public.
This issue involving dissemination of information via social media is something that will continue to be evaluated and evolve over time. As different means for providing announcements to the public become more prevalent, the Securities and Exchange Commission will have to continue to adapt its regulations related to disclosure of material information. Time will tell whether Musk faces legal ramifications for his tweet or if his Twitter account should be deleted altogether to avoid any problems in the future.
If you have any questions or would like more information, please contact Matt Jones at [email protected].