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Original title: Musk tweeted that “Is Tesla’s stock price too high” will lead to a penalty? Source: Netease Technology
In recent days, US tech tycoon Elon Musk has posted many tweets related to the Tesla outbreak and the new coronavirus, causing the company’s stock price to fluctuate. Do these tweets violate the relevant laws? Legal experts have different opinions on this, but this move undoubtedly violates the settlement agreement reached with the United States Securities and Exchange Commission (SEC).
On Friday, local time in the United States, Musk released a document saying he will sell “all physical assets,” and then called “Tesla’s stock price is too high,” causing the stock price to drop. of the company. In the latest earnings call, Musk criticized California’s “on-site quarantine” ban to curb the spread of the new coronavirus, saying failure to resume production should be viewed as a significant risk to Tesla and that it violated the Constitution and conferred To US Citizens Right It is unclear whether the tweets that Tesla’s stock price is too high are securities fraud. Legal experts also have different opinions about it.
Evelyn Cruz Sroufe, a partner specializing in corporate governance at the Perkins Coie law firm, said: “I see no signs of illegality.” To accuse Musk of securities fraud, the SEC or other plaintiffs must demonstrate that Musk will benefit from lower share prices by holding short positions or put options. Slough said via email: “On the contrary, it looks like Musk is showing off! He used the phrase ‘in my opinion’ in his tweet, just to express his personal opinion, so there is room for it.”
Alma Angoti, a partner at Guidehouse and co-director of the global research and compliance business, said that, generally, when a company wants to communicate to shareholders that its actions may be overvalued, it will provide Facts and risk factors to do this. Angotti has previously worked in law enforcement agencies like the SEC, said: “You give the facts so that the market can analyze these facts. And Musk did not give a good reason why the stock price is too high, and your comments is done informally. “
In Angotti’s view, market manipulation (that is, someone taking steps to artificially affect the price of securities) requires specific intent: “Musk does not need to profit from it, although profit is often the way that government shows its intention. ” Due to Musk’s past actions, the SEC is already watching him.
John Reed Stark John Reed Stark, president of consulting John Reed Stark, previously worked in the SEC’s compliance department, he and Agnotti have different opinions. Stark said: “Musk’s intentions are difficult to prove.”
Greg Shill, a law professor at the University of Iowa, bluntly stated that he did not know if this was a securities fraud. Hill said: “The CEO of a publicly traded company asks the market to reduce the value of his company’s stock. This is not common, but it is not necessarily illegal.”
Steve Diamond, a law professor at Santa Clara University, said that for Musk, the worst case scenario is that he is buying Tesla shares or that the company is participating in a share buyback program. But he believes that Musk is not currently involved in any of the above situations.
However, this may be related to the settlement agreement and the SEC review. On August 7, 2018, Musk tweeted, “I am considering privatizing Tesla for $ 420. The funds are already in place!” However, the SEC investigation found that, in fact, the funds were not in place. Although Musk held several meetings with the Saudi sovereign wealth fund, he did not discuss the privatization transactions. The SEC wrote in the indictment: “In fact, Musk has not even discussed the key terms of the transaction, including the price, with any potential source of funds, let alone confirmed that the funds are in place!”
In any case, Musk struck a deal with the SEC. But on February 19, he predicted on Twitter the Model3 number Tesla will produce, which is different from Tesla’s official expectations. The terms of the settlement agreement stipulate that Musk’s tweets about Tesla must be approved by internal attorneys in advance. When the agency asked if its in-house attorney approved the February 19 tweet, the response was that Musk had not previously approved any tweets about Tesla. After a few weeks of competition, the two sides struck a new deal: Musk’s tweets about Tesla’s financial health, sales, or delivery numbers must be approved by the company’s attorneys in advance.
So did Musk’s last tweet violate this deal? The American media recently contacted Musk to ask if he was joking, or if someone had checked it out before tweeting it. Musk responded by email saying “no”.
Diamond said: “If there is no review, Musk will risk being brought back to court by the SEC. The purpose of this process is to capture these tweets before they are published. If Musk is a freely published tweet, I think He may be in trouble. “
Jay Dubow, a partner in the white-collar litigation-focused Pepper Hamilton law firm, believes the SEC’s situation is also very difficult. For one thing, if Musk’s tweet was not approved by an attorney, he would publicly challenge the settlement agreement reached with the SEC. On the other hand, if the SEC forces Musk to draw a line with Tesla, this can hurt shareholders who bought Tesla shares because they trusted him. Dubbo said: “The SEC will have to react or do something. Because this clearly violates the settlement agreement, I don’t know how they will take action.”
Hill also believes Musk’s tweet is challenging for the SEC. He said: “The SEC’s request to confirm whether the settlement agreement is being followed will be a cautious approach. Today, Musk can be said to be providing Tesla shareholders with what I want: a CEO without restrictions or dissimulation. When you buy Tesla stock, you can say this is what you want to buy. But the SEC settlement agreement has more restrictions. “
Angotti said that if Musk’s tweet violated the settlement agreement, Tesla would also be implicated because the company had been asked to monitor Musk’s comments. She said Tesla’s board of directors may be responsible for Musk’s actions. Angotti explained: “If they cannot control the CEO, they cannot ensure that the company has a very good culture of compliance. If they do not enforce the agreement, it makes no sense.”
However, trying to hold Musk accountable can embarrass the board. Tesla stated in its regulatory filing on April 28 that the company has abandoned liability insurance for directors and senior executives. This policy eliminates the need for companies, board members, and executives to pay their own defense, settlement, or judgment fees when faced with litigation. Instead, Musk “will provide personal insurance substantially equivalent to that one-year policy.”
