How Elon Musk's Twitter Blocking Could Land Him In SEC Trouble

Elon Musk’s tweet Tuesday announcing that he was “considering taking Tesla private” may have been illegal—but not for the reasons many people think.

Using Twitter to disclose such crucial market-moving information may seem unorthodox. But the platform has been a bonafide channel for investor communication since 2013, when the Securities and Exchange Commission blessed social media as a valid disclosure method—as long as companies gave investors a heads-up they would post it there.

Tesla complied with this requirement a few months later, directing investors, in a November 2013 earnings press release, to “please follow Elon Musk’s and Tesla’s Twitter accounts” for additional information.

Since then, though, Tesla’s CEO has developed a habit that could undermine the company’s good standing with the law, according to a former SEC regulator who helped establish the agency’s social media policy: Elon Musk routinely blocks people from following him on Twitter.


After all, the SEC looks at social media announcements through the lens of fair disclosure requirements, as defined in a rule known as Regulation FD. Companies’ communication methods must be “reasonably designed to provide broad, non-exclusionary distribution of the information to the public,” according to the rules.

“The point is to just make sure everyone knows,” says Michael Liftik, former deputy chief of staff of the SEC, who helped conduct the 2013 social media inquiry and is now a partner at the law firm Quinn Emanuel Urquhart & Sullivan. “But when you start blocking, that kind of does change the equation, because that kind of becomes a selective disclosure if you’re not letting anyone who wants to follow you, follow you. I do think that creates problems.”

Fortune identified at least three dozen people who say Musk has blocked them on Twitter, including investors, journalists, and short-seller Mark Spiegel, a hedge fund manager who has been an outspoken critic of Tesla. (I should know what it feels like: Musk blocked me from following him on Twitter sometime in mid-2016, something I first noticed shortly after I wrote an article pointing out the significant overlap in the boards of Tesla and SolarCity as the companies announced their plan to merge. Musk also blocked several of my colleagues around the same time, in apparent protest of a Fortune article by Carol Loomis suggesting Tesla had waited too long to disclose a fatal crash of one of its cars running on autopilot—which turned out to be material to Tesla’s stock price.)
Source: http://fortune.com

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