Tuesday, April 5, 2022

It's not quite like Ponzi buying the Boston Post, but...

Elon Musk just became the largest shareholder in Twitter with almost 9% of the company. This would be big news whoever the buyer was, but it takes on layer upon layer because of the relationship Musk and Tesla have with the social media platform. 

Tesla, unlike virtually every other major company, does not have a PR department. There are literally no set official channels for journalists to reach out to for questions or for comments on articles. Practically everything is done through tweets to Musk's eighty million followers (a plurality of who are fan boys or bots) giving him a great deal of control over the narrative, particularly with damaging stories like the revelation of widespread racial harassment at Tesla plants.
A lot of those followers are also retail investors, making Twitter an ideal platform for stock manipulation. 

Brian Contreras and Russ Mitchell writing for the LA Times.
Indeed, the CEO has clashed repeatedly with financial regulators over his use of Twitter. His latest purchase comes as he’s locked in a bitter dispute with U.S. securities regulators over his ability to post on the site.

In October 2018, Musk and Tesla agreed to pay $40 million in civil fines and for Musk to have his tweets approved by a corporate lawyer after he tweeted about having the money to take Tesla private at $420 per share.

The funding was far from secured and the electric vehicle company remains public, but Tesla’s stock price jumped. The settlement specified governance changes, including Musk’s ouster as board chairman, as well as preapproval of his tweets. The SEC brought a securities fraud charge, alleging that Musk was manipulating the stock price with his posts.

Musk’s lawyer is now asking a U.S. District Court judge in Manhattan to throw out the settlement, contending that the SEC is harassing him and infringing on his 1st Amendment rights.

Not to put too fine a point on it, but Musk's stock manipulations have made him the world's richest man and conveniently allowed his brother Kimbal to unload over a hundred million dollars worth of stock at the exact peak of the market.  The SEC is looking into this but if Elon's attitude is the same as it was, he's not too concerned.

Twitter is also the primary platform for critics of Tesla and Musk, which brings up some troubling free speech questions, as does Musk's recent and increasingly open move toward the MAGA wing of the Republican Party. 

For more from Ed (who literally wrote the book on Tesla), check out this thread.

The good news is that, in order to get around some pesky rules, Musk signed on as a passive investor. 

From the LA Times:
Although Musk is now Twitter’s largest shareholder, his stake is a “passive investment,” meaning under U.S. securities laws he is barred from seeking control of the company — but that doesn’t preclude him from doing so in the future, through active investments.

It also doesn’t mean Musk must remain passive in communicating his thoughts about Twitter, in public or within the company, said Charles Elson, founding director of the Weinberg Center for Corporate Governance.

In case you were wondering how long it took Musk to start pushing that envelope...

Update: There's more.

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