August 9, 2022
Elon Musk’s Legal Issues Caused Tesla, Twitter Shares Drop

Tesla and Twitter shares fell this week as investors deal with the fallout and potential legal issues of Tesla CEO Elon Musk and his $44 billion (about Rs 3,40,100 crore) bid to buy the social media platform.

Of the two, Musk’s electric vehicle company has performed poorly, with its stock falling nearly 16 per cent to $728 (about Rs 56,300) so far this week. Twitter shares fell 9.5 per cent for the week to close at $45.08 (about Rs 3,500) on Thursday. Both stocks have taken a bigger hit than the S&P 500, which is down 4.7 percent for the week.

With broader markets unwell, investors have had to weigh legal troubles for Musk, as well as the possibility that his acquisition of Twitter could distract from driving the world’s most valuable automaker.

The Wall Street Journal reported Wednesday that US securities regulators are investigating Musk’s slow disclosure that he bought more than 5 percent of Twitter’s shares. Musk now owns more than 9 percent of the San Francisco company.

The SEC would not comment, and a message was left for Musk’s attorney.

A lawsuit filed last month by some Twitter shareholders alleges that since Musk’s stake reached 5 percent on March 14, he should have filed forms with the SEC by March 24. Instead, Musk didn’t make the required disclosure until April 4, leading to an injury lawsuit alleging less wealthy investors who sold Twitter stock nearly two weeks before disclosing their stake and raising the price.

Also on Wednesday, a federal judge in California handed a major victory to a group of Tesla shareholders, overcoming their decision that Musk falsely and casually tweeted in 2018 to take Tesla private if the deal didn’t finalize. He had the money safe. The tweets soared Tesla’s share price at the time.

The ruling means that jurors in a shareholder trial will begin to learn that after the judge ruled that Musk’s tweets were false.

At the time of the August 7, 2018, tweet, Musk was in talks with the Saudi Public Investment Fund about controlling the deal. But Judge Edward Chen determined it was not final when Musk tweeted: “I am considering taking Tesla private for $420 (about Rs 32,500). Funding is secure.”

Chen wrote that there was “nothing concrete” about funding from the Public Investment Fund, and that the discussion was apparently preliminary.

Chen wrote, “There was no discussion about what the purchase price would be for a share of the stock. Nor was there any discussion about what percentage of the PIF would hold the company or contribute to the total amount of the PIF.” ” His rule.

Musk’s lawyers have asked Chen to reconsider, arguing that he is not aware of cases in which a court has taken similar issues out of the hands of a jury “where the statements were most vague and word-constrained.” and were issued in an informal context. Post on Twitter.”

The August 2018 tweets have landed Musk in legal trouble. The SEC brought a securities fraud charge, which Musk and Tesla settled in 2018. Each agreed to pay a fine of $20 million (about Rs 150 crore) and a company lawyer would review any tweets from Musk that could affect the stock price. The SEC is investigating whether Musk violated that requirement.

Musk recently lost a bid to settle on the grounds that it violated his First Amendment free speech rights.

Since Musk publicly offered Twitter for $54.20 (about Rs 4,200) per share to buy on April 14, the shares are priced exactly the same – $45.08 (about Rs 3,500). Analysts say it signals investor skepticism that the deal will take place, even though Musk has outlined the financing. Twitter shares are up 4.3 percent to date.

However, Tesla shares are down 26 percent since the April 14 offering, partly due to fears that Musk will be distracted, as Tesla, which is headquartered in Austin, Texas, opens two new factories and is facing supply chain issues. deals with. The shares have fallen more than 30 per cent so far this year.

© Thomson Reuters 2022

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