Shares of Tesla and Twitter have plunged this week as investors grapple with the fallout and potential legal issues surrounding Tesla CEO Elon Musk and his $44 billion bid to buy the networking platform. social.
Of the two, Musk’s electric vehicle company has fared worse, with its shares down nearly 16 percent so far this week at $728. Twitter shares fell 9.5 percent for the week, closing Thursday at $45.08. Both stocks have taken a bigger hit than the S&P 500, which is down 4.7 percent for the week.
Along with the unrest in broader markets, investors have had to weigh Musk’s legal troubles as well as the possibility that his acquisition of Twitter could be a distraction from the management of the world’s most valuable automaker.
The Wall Street Journal reported on Wednesday that US securities regulators are investigating Musk’s belated disclosure that he had bought more than 5 percent of Twitter stock. Musk now owns more than 9 percent of the San Francisco company. The SEC did not comment and a message was left for Musk’s attorney.
A lawsuit filed last month by some Twitter shareholders alleges that Musk’s stake reached 5 percent on March 14, so he should have filed forms with the SEC to disclose that by March 24. Instead, Musk did not make the required disclosure until April 4, hurting less wealthy investors who sold shares of Twitter in the nearly two weeks before he disclosed his stake and raised the price, the suit alleges.
Also Wednesday, a federal judge in California awarded a group of Tesla shareholders a major victory, revealing his ruling that Musk falsely and recklessly tweeted in 2018 that he had secured funds to take Tesla private when the deal was not final. The tweets drove up Tesla’s stock price at the time. The ruling means jurors in a shareholder lawsuit will start knowing the judge ruled Musk’s tweets were false.
At the time of the tweets on August 7, 2018, Musk was in talks with the Saudi Arabian Public Investment Fund to finance the deal. But Judge Edward Chen ruled that it wasn’t final when Musk tweeted: “I’m considering taking Tesla private at $420. Financing secured.” Chen wrote that there was nothing concrete about the financing of the Public Investment Fund and that the discussions were clearly preliminary.
“There was no discussion about what the purchase price of a share would be. There was also no discussion of what percentage of the company would be owned by the PIF or the total amount of money the PIF would contribute,” Chen wrote in his sentencing.
Musk’s lawyers have asked Chen to reconsider, saying they are not aware of cases in which a court has taken similar matters out of the hands of a jury where statements were ambiguous at best and delivered in the Informal and limited word context of posts. On twitter.
The August 2018 tweets have already landed Musk in legal trouble. The SEC filed a securities fraud charge, which Musk and Tesla settled in 2018. They each agreed to pay a $20 million fine and that a company attorney would review any tweets by Musk that could affect the stock price. The SEC is investigating whether Musk has violated that requirement.
Musk recently lost a bid to have the deal thrown out for violating his First Amendment free speech rights. Since Musk made his $54.20 per share offer to buy Twitter publicly on April 14, the shares have been priced exactly the same at $45.08. Analysts say that’s an indication of investor skepticism that the deal will go through even though Musk has secured financing. Twitter shares are up 4.3 percent year to date.
Still, Tesla shares are down 26 percent since the April 14 offering, in part over fears that Musk will be distracted as Austin, Texas-based Tesla opens two new factories and deals with problems. of the supply chain. The shares are down more than 30 percent so far this year.
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