9:01 am, April 21, 2022
Elon Musk’s lawyer says ordering the Tesla CEO to stop talking about his tweets outlining he could fund taking the company private would trample on his free speech rights.
In a court document filed yesterday (Apr 19), lawyer Alex Spiro said a motion from a group of Tesla shareholders seeking a gagging order didn’t establish that Musk’s comments would prejudice the jurors who may hear the case.
Lawyers for the shareholders claim Musk is trying to influence potential jurors before the lawsuit comes to trial next January.
They claim the CEO’s tweets of 2018 were written to manipulate the stock price, costing shareholders money.
In court documents, the shareholders say US district judge Edward Chen in San Francisco has already ruled that Musk’s statements about having the money to take Tesla private at $420 (£321) per share were false.
They also argue that Musk, pictured at top with a Tesla Model Y, violated an October 2018 court settlement with US securities regulators.
Musk signed an agreement to pay a $20m (£15.3m) fine and not make any statements denying securities fraud allegations, but he’s challenging the agreement, calling it unconstitutional.
Spiro’s response came a few days after Musk – the world’s richest person – made a controversial offer to take over Twitter and turn it into a private company with a $41.39bn offer at $54.20 per share.
On Friday, Twitter’s board adopted a ‘poison pill’ strategy that would make it prohibitively expensive for Musk to buy the shares.
At issue is his interview at the Ted 2022 conference on April 14, where he said he had funding secured to take Tesla private in 2018.
He called the Securities and Exchange Commission a profane name and said he only settled the case because bankers told him they’d stop providing capital if he didn’t and Tesla would have gone bankrupt.
Lawyers for the shareholders say his comments in the interview were an ‘unsubtle attempt to absolve himself in the court of public opinion’ over misrepresentations made with his 2018 tweets.
But Spiro wrote in his response that the shareholders didn’t show that Musk’s speech presented a ‘clear and discernible danger’ that the whole community would be corrupted by pre-trial publicity, or that finding 12 objective jurors would be impossible.
His motion says that Musk is in the middle of a public offer to take over Twitter, which has led to debate over censorship of free speech. Reporters, he wrote, have compared this to Musk’s previous statements about taking Tesla private.
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During the Ted interview, Musk was asked if funding was secured for the Twitter deal – a reference to the 2018 Tesla tweets.
‘Mr Musk should be permitted to respond meaningfully and truthfully to inquiries such as this, and not be compelled to remain silent,’ Mr Spiro wrote.
If Musk violated the SEC agreement, the agency can ask a judge to scrap it and restore the securities fraud complaint.
The SEC declined to comment.
Musk is facing a potential class action over his Twitter shares acquisition.
The Times reported that Marc Bain Rasella had filed a lawsuit ‘on behalf of all investors’ who sold shares in the platform between March 24 and April 1.
Rasella claims Musk left them out of pocket because he didn’t reveal soon enough what he was doing.
It’s estimated Musk saved some $143m (circa £110m) by delaying his announcement, which meant he bought the shares at prices that were artificially ‘deflated’.
He should have made his disclosure by March 24, as the number of shares that he bought totalled more than five per cent, but only did so on April 4, the lawsuit claims.
Meanwhile, The Times reports today that Musk is set to receive stock awards that are worth in excess of $23bn (£17.6bn).
He doesn’t receive a salary but will get three lots of shares via his compensation arrangement with Tesla, which has just posted record profits for the first quarter, with sales up by 81 per cent.
Tesla’s revenue for the quarter was $18.76bn (£14.36bn) and $5.02bn (£3.84bn) in adjusted earnings.
