TESLA

Elon Musk wants to make his crown jewel in public company

Even a CEO with the reputation for making odd and incendiary remarks, Elon Musk's Twitter output on Tuesday broke new ground.
With Elon Musk’s decision to tweet he was considering taking Tesla TSLA, +0.38% private at $420 per share — and that he has funding for it — questions immediately swirl for both the company and federal law enforcement.
First, the most obvious — is Musk serious? Because if he is, the tweet still may have violated law, to a small degree, by not informing investors over other channels.
Regulation Fair Disclosure, or FD, requires companies “to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively.”
A post by Netflix CEO Reed Hastings on his personal Facebook page about the service’s NFLX, -0.09% viewership triggered an investigation, but not enforcement action, by the Securities and Exchange Commission. The agency then clarified that a social-media post, on its own, is not enough, unless investors are warned ahead of time to watch that space.
There does not appear to be any communication from Tesla to keep a close tab on Musk’s Twitter feed.
“If a company has always issued its earnings releases in a conventional matter, and it had not alerted investors, then that can be a problem, because an investor who happens to watch the Twitter feed, may have an unfair advantage,” said Ira Matetsky, a partner at Ganfer Shore Leeds & Zauderer in Manhattan.
Even in this situation, however, Musk’s position is unique. With over 22 million followers as of Tuesday, Musk’s Twitter presence is not obscure, and his tweet was nearly simultaneously broadcast through financial business media. Wouldn’t Musk’s lawyer argue that the tweet was available to everyone?
“I would certainly expect that point to be made,” Matetsky said. “I can’t think of a precedent.”
In this situation, however, the proposed offer price itself raises a question about Musk’s seriousness. The $420 figure is suggestive of marijuana, as April 20, or 4/20, is a date celebrated by cannabis enthusiasts.
Later, Tesla published a letter from Musk to employees confirming he is considering a bid for the company at $420 per share.
The question still remains about whether he does have financing in place for a bid, regardless of how serious his contemplation is about a taking-private offer. If he hasn’t, then he has made a materially false statement. The stock surged in reaction, so the market took his comment at least somewhat seriously, which the subsequent shareholder letter justified.
Matetsky pointed out the degree of liability for Musk depends on how serious or not this possible bid is.
“If he doesn’t have financing in place, but the deal happens anyway, then it may be, no harm, no foul,” he said. “If this was a pipe dream going nowhere, there will be a case.”


Steve Goldstein