WEBVTT - Will Elon Musk Need a Twitter Sitter?

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. Elon Musk seems

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<v Speaker 1>to have come out on top in his latest battle

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<v Speaker 1>with the SEC over his tweeting. The SEC asked to

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<v Speaker 1>Judge to find the testleas CEO in contempt of court

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<v Speaker 1>for violating in October settlement over tweets. With a tweet

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<v Speaker 1>in February and hearing on Thursday, Judge seemed to have

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<v Speaker 1>kicked the conflict back to the parties, joining me as

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<v Speaker 1>Peter Handing, professor at Wayne State University Law School. So,

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<v Speaker 1>is this basically a punt where the judge says, you

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<v Speaker 1>guys work this out, I have some more important work

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<v Speaker 1>to do here. Well. Certainly judges much prefer, especially in

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<v Speaker 1>civil cases, that the parties work it out among themselves.

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<v Speaker 1>I think calling it a punt is probably the best

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<v Speaker 1>way to describe it. That she has said, if you

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<v Speaker 1>really want me to decide, you can force me to

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<v Speaker 1>by not agreeing, But I think her very strong preference

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<v Speaker 1>is that she doesn't want to hold Musk in contempt,

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<v Speaker 1>nor does she want to smack down the SEC. So

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<v Speaker 1>I think she's very much hoping that they will come

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<v Speaker 1>up with some compromise that she can then sign off on.

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<v Speaker 1>So it appears the SEC's reading of the agreement was

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<v Speaker 1>too restrictive and Musk's reading would just undermine the agreement

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<v Speaker 1>in full. So is it going to end up somewhere

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<v Speaker 1>in the middle. Oh, I certainly suspect, and I think

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<v Speaker 1>the key question is whether Elon Muski is willing to compromise, because, um,

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<v Speaker 1>you know, he he's shown some rather substantial to steam

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<v Speaker 1>for the SEC. But Kenny's attorneys convinced him that let's

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<v Speaker 1>come up with something that essentially works as a fake

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<v Speaker 1>saving device for both sides and then the judges. At

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<v Speaker 1>least she signaled that she would be willing to sign

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<v Speaker 1>off on that if the parties can't agree. So I

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<v Speaker 1>think we'll see something maybe somewhere in the middle. I'm

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<v Speaker 1>not sure who's going to get to crow about it,

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<v Speaker 1>but certainly, um, I don't think we'll see major changes

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<v Speaker 1>to the settlement agreement. So Musk's lawyers had argued in

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<v Speaker 1>court filings that that he has curtailed his use of

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<v Speaker 1>Twitter recently, but a review of his account shows he's

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<v Speaker 1>tweeted more in March than any other month since June.

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<v Speaker 1>But could it be that the people who follow him

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<v Speaker 1>on Twitter no not to rely on his tweets. Does

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<v Speaker 1>the SEC have more important things to go after than this, Well,

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<v Speaker 1>I certainly think the SEC wanted to send a message um,

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<v Speaker 1>and especially you know they cited his interview on sixty

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<v Speaker 1>Minutes UM in their contempt filing. I think what the

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<v Speaker 1>SEC wants is at least some acknowledgement that that settlement

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<v Speaker 1>agreement had some teeth to it, beyond the twenty million

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<v Speaker 1>dollars that both Tesla and must paid. I think they

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<v Speaker 1>want to see that Twitter is not just going to

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<v Speaker 1>be a way for him to communicate anything that he

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<v Speaker 1>feels like. And so what their goal is I suspect

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<v Speaker 1>is to get an adult in the room to be

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<v Speaker 1>able to look at the tweets. And that may be

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<v Speaker 1>the compromise they come up with that before he tweets,

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<v Speaker 1>he gets someone to review it in advance, although you know,

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<v Speaker 1>you wonder whether he would be willing to do that.

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<v Speaker 1>I thought he already had a so called Twitter sitter. Well,

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<v Speaker 1>he has something of a Twitter sitter, although in the

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<v Speaker 1>settlement agreement it's only when he's going to disclose what's

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<v Speaker 1>called material and from nation, in other words, information an

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<v Speaker 1>investor would consider important. Um, that's when he has to

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<v Speaker 1>have it reviewed. But for his other things, if he

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<v Speaker 1>wants to comment on the latest full moon, he could

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<v Speaker 1>probably do that. I expect the SEC is hopeful that um,

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<v Speaker 1>he might start to cut back on his Twitter use,

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<v Speaker 1>and one way to do that would be to get

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<v Speaker 1>someone else in there to review it. So you may

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<v Speaker 1>have to get a full time Twitter center. Now. Could

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<v Speaker 1>an agreement possibly include a scale of fines escalating fines

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<v Speaker 1>and we've talked before about our fines really useful when

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<v Speaker 1>you're facing people with so much money. Well, that's certainly

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<v Speaker 1>the big question that um, you know, I mean, if

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<v Speaker 1>the first fine we're fifty or a hundred thousand dollars

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<v Speaker 1>um for a billionaire like Elon Musk, that's more or

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<v Speaker 1>less tip money. Um, And is that even going to

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<v Speaker 1>get his attention? Maybe the SEC comes up with some

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<v Speaker 1>type of schedule, of course, though that would likely require

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<v Speaker 1>them to go to the judge to get her judge

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<v Speaker 1>Nathan to impose a fine. And so I'm not sure

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<v Speaker 1>how elaborate they want to be here. I suspect that

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<v Speaker 1>the SEC's bigger goal is just to try to get

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<v Speaker 1>him not to tweet about the company as much as

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<v Speaker 1>he had, or at least be a bit more restrained

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<v Speaker 1>in that you could put fines in there. But you know,

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<v Speaker 1>is a billionaire going to notice a fine that's listed

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<v Speaker 1>in the thousands of dollars? I think the answer to

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<v Speaker 1>that is no. And Um, as far as the Department

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<v Speaker 1>of Justice, it's investigation of Musk and Tesla, where does

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<v Speaker 1>that stand? Well, we haven't heard much about that lately.

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<v Speaker 1>They were looking at the company's disclosures with regard are

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<v Speaker 1>to their production. UM. That's an area typically where the

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<v Speaker 1>Justice Department defers more to the SEC because it's a

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<v Speaker 1>corporate disclosure issue. UM. I question whether we'll see anything

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<v Speaker 1>come out of the Justice Department's investigation because that's not

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<v Speaker 1>an easy case to make. I mean that companies make

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<v Speaker 1>estimates all the time, and a lot of times they're wrong,

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<v Speaker 1>and so the companies are allowed to make mistakes and

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<v Speaker 1>be able to say things unless you're intentionally misleading investors,

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<v Speaker 1>and my bed is Tesla was not trying to mislead investors.

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<v Speaker 1>Elon Musk is simply pumping up Tesla and saying, Gee,

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<v Speaker 1>what a great company we are. Well, I would like

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<v Speaker 1>to be at the meeting the judge ordered on. The

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<v Speaker 1>judge ordered that must meet with SEC officials for at

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<v Speaker 1>least one hour within the next two weeks. And considering

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<v Speaker 1>all the things he has said, all the negative things

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<v Speaker 1>he said about the SEC, what might that meeting be? Like, Peter, Well,

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<v Speaker 1>you know, you think back to your elementary school or

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<v Speaker 1>high school days when you were called It's a long

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<v Speaker 1>time to think back. Okay, well, I know it's a

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<v Speaker 1>long time for me too. But it's essentially he's being

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<v Speaker 1>sent to the principal's office, um, and they're gonna have

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<v Speaker 1>to sit down and work something out. He's gonna have

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<v Speaker 1>his lawyers with him. Uh So I expect we we

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<v Speaker 1>may well see a bit more circumspect Elon Musk, at

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<v Speaker 1>least for a little while. UM will run out. Long term.

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<v Speaker 1>I think he enjoys having his twenty plus million followers

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<v Speaker 1>on Twitter too much to be able to really restrain

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<v Speaker 1>himself from saying things, and he likes the publicity, and

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<v Speaker 1>apparently he obviously we would have heard about it if

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<v Speaker 1>he was disrespectful in any way in the courtroom yesterday.

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<v Speaker 1>So he must be at least behaving himself in that

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<v Speaker 1>regard certainly, and I expect his lawyers had a brief

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<v Speaker 1>discussion with him, saying, you had better be careful in

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<v Speaker 1>front of a federal judge. If you do anything to

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<v Speaker 1>mouth off, that could be disastrous for you with the sec.

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<v Speaker 1>You know, maybe he can be a little bit more lippy.

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<v Speaker 1>All right, Thanks so much, Peter. This will continue on

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<v Speaker 1>I can guarantee that that's Peter Handing, a professor at

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<v Speaker 1>Wayne State University Law School. Thanks for listening to the

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<v Speaker 1>Bloomberg Law Podcast. You can subscribe and listen to the

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<v Speaker 1>show on Apple Podcasts, SoundCloud, and on bloomberg dot com

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<v Speaker 1>slash podcast. I'm June Brosso. This is Bloomberg