for more on this spring. And Jacob frenkel,
former sec lawyer and chair of government investigations and security
enforcement practices at Dickinson wright? P. L.
L. C. Jacob Elon musk is now being
accused of violating a twitter as an N. D
. A. For sharing this information. What do
you make of this? Do you think this actually
puts the deal in any sort of real peril?
I think it's much too early to look at this
deal as being as being in peril. I think
with mr musk there's always a lot of excitement around
the transaction. I mean what we're hearing is what
mr musk is saying that twitter's lawyers are saying we're
hearing from twitter lawyers were not hearing from mr musk
lawyers. I mean ultimately what we really may be
dealing with here is a fair amount of posturing given
maybe some discomfort about the change in the price,
of the stock change of conditions and an effort on
his part, ultimately try to push down the ultimate
acquisition price. Um I don't I think it's premature
to suggest that the transaction is actually in jeopardy.
And in many respects at this point I'm almost much
more interested in the sec? S investigation that was
reported last week around beneficial ownership disclosure and the timing
around that because there you're getting into the disclosure side
of the of the issue and the timing of that
disclosure by him rather than you know the back and
forth. That often takes place in the course of
a corporate transaction particularly one of this size. Let's
talk about about the sec s kind of investigation or
potentially investigations. Right. Because this kind of talk
on twitter in terms of this deal really has caused
just a ton of volatility in twitter stock as a
result. And I wonder if even just this posturing
as you called, it puts Elon musk in further
hot water with the sec amid the kind of hot
water situation that has already in around disclosure. Well
yeah, Alicia, that's a great question. It
really covers a lot of issues. You know,
I mean the the issue involving Tesla in 2018 2019
was whether his statements about uh, about Tesla,
uh, you know, somehow involved manipulating the price
of the security. I don't really seeing that being
the issue here. I think the issue here was
, you know, it was in March that the
band began acquiring the stock. The law is very
clear. It's a strict liability statute, meaning if
you violate, it's almost like a speed limit.
You know, if you go faster than the speed
limit, you're in violation of the law. It
doesn't mean it gets enforced. But the violation exists
That's true. Somebody owns more than 5% of the
stock of a public company is required to disclose that
the faculty went from 5% to 9%. It was
only the 9% threshold he made that disclosure. And
in the process probably saved somewhere between 100 million$150
million dollars in the transaction. That gives rise to
a number of issues for the sec one is the
actual filing too. When did he actually have the
intent to shift from passive to active because that's an
entirely separate disclosure issue for him And you could,
you could, you could you just tell me really
quickly in terms of what's the possible penalty here and
for a billionaire like Elon musk? Is that penalty
? Really one that has true bite. That's a
that's a that's a great question because we've already seen
him try to back away from the previous injunction.
The answer is probably not. It does not have
real bite. But there comes a point where regardless
of somebody's affluence and stature repeated hits from a regulator
. Like the sec really does have a reputational impact
. And I think that goes back to your original
question about whether this transaction is going to survive if
he looks for a reason to undermine the transaction and
to try to walk away the next time Elon musk
is trying to make some major acquisition. The first
question is going to be, is this guy for
real you know, are you know, is he
playing with us the same way he played with twitter
? That's not to suggest he's not interested in moving
forward with twitter but but to your point, you
know, he views the sec as a nuisance and
the real question is going to be whether the sec
has the stomach to take him on, I'm running
a long time with you. So I want to
jump to this kind of question. The reality is
that this, this deal to some extent, at
least in the mind of some people is up in
the air. Do you really think that's the case
and if it is and and Elon musk decides to
pull out, is it really as simple as you
know, paying the fine or they're really gonna be
um some challenges in terms of pulling out of this
deal? I think, I think if you if
you were to accept this deal, there will be
, there will be a major breach of contract lawsuit
from twitter, there will be shareholder litigation. But
as I've indicated, I really think it's premature for
the public really to be begin thinking that mr musk
is looking to walk away from this field, how
would he do? So, in terms of like
if he wanted to walk away from this deal,
do you think that's anything that again, you're saying
it's not really on the table right now, but
how would he do so, would it be a
matter of saying, hey, this issue with the
box is enough to kind of call it quits?
Well, I think, you know, we haven't
none of us have seen the nondisclosure agreement in the
terms of the actual agreement to figure out what are
the breakup points that would enable him to walk away
from the deal. I mean I think a lot
of that would have been spelled out and is spelled
out any agreement between him and twitter and I think
, you know, his lawyers will you know,
will look, you will assert that there were material
misrepresentations made to him about twitter. But ultimately I
really think what's going on here as well as much
around repositioning and trying to negotiate, renegotiate the price
of the stock. We've seen that before historically and
I think that's what's going on here. I think
I'm in the same camp with you. Jacob really
appreciate your time and your insight. Jacob, franco
, former sec, lawyer and chair government investigations and
security enforcement practices at Dickinson Wright, PLLC.