Analysis: ManU tweet of Musk’s ‘joke’ unlikely to land him red card from regulator – legal experts

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Elon Musk’s Twitter account and Manchester United logo are seen in this illustration taken August 17, 2022. REUTERS/Dado Ruvic/Illustration

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WASHINGTON, Aug 17 (Reuters) – While the U.S. securities regulator will likely review Elon Musk’s tweet in which he joked about buying New York-listed soccer club Manchester United (MANU.N), the Legal experts say that at first glance, the crack is unlikely to land in hot water.

Musk, the world’s richest person, briefly lifted the gloom over the club’s actions by tweeting on Tuesday: “I buy Manchester United ur (sic) welcome”, to his 103 million followers, later adding that it was a “joke”. Read more

Even so, the 51-year-old Tesla CEO’s thoughts ignited Manchester United shares, which briefly jumped 17% after hours trading before ending Wednesday at $13.67, up nearly 7% at Tuesday’s close.

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Known for his unconventional and irreverent style, Musk has a history of moving stocks and cryptocurrencies with his tweets and has been locked in a row with the United States Securities and Exchange Commission (SEC) ever since he took over. tweeted in 2018 that he secured funding to take Tesla private. when the SEC concluded that he had not. Read more

According to court and regulatory filings, the SEC has multiple investigations into Musk’s later tweets about Tesla and questioned others about his $44 billion deal to buy Twitter itself, which it is now. involved in a legal fight to get out. Read more

Joke or otherwise, the tweets are likely to attract the attention of the SEC, given the stock price performance and Musk’s history of circumventing US securities rules, have said legal experts.

“It may have been a joke to some, but it won’t be to regulators,” said Jacob Frenkel, a Washington-based attorney at Dickinson Wright and a former SEC official. “Regulators will want to know what prompted the tweets,” Frenkel said, adding that they would likely look closely at the exchanges around the tweet.

Regulators would be interested if there was evidence that Musk deliberately or recklessly tried to manipulate the market, said Hui Chen, a compliance consultant and former Justice Department lawyer.

The SEC declined to comment. Musk’s attorneys did not respond to a request for comment.

HORIZONTAL BAR

Still, the bar for pursuing an enforcement action is high, several other lawyers said.

Since Musk is not an executive of Manchester United, he does not have the same legal obligations to his shareholders as to those of Tesla, and there is no indication that he or anyone close to him has a major financial interest. in the soccer club.

And while Musk’s comments about Tesla are subject to special legal checks as part of a deal he reached with the SEC to resolve his allegations that his 2018 “secured funding” tweet violated the rules of The agency says US free speech protections give Musk plenty of leeway to comment on the issues. beyond its electric car maker.

Moreover, his clarification that the Manchester United tweet was a joke addresses the question of his intentions.

All in all, the SEC is unlikely to be able to demonstrate that he was attempting to commit securities fraud, based on the available information, multiple attorneys said.

“At least on the facts that we know, I suspect it will be difficult to prove that Musk … acted with intent to deceive,” said Robert Frenchman, partner at Mukasey Frenchman LLP.

Others said Musk’s history of fanciful Twitter comments — ranging from an April Fool’s Day joke about Tesla’s bankruptcy to aliens and the zombie apocalypse — could also be cited in his defense, whether regulators or other parties dispute the tweet. . Read more

Arguably, investors now know how to treat Musk’s tweets with caution, said Howard Fischer, a partner at Moses & Singer in New York.

“While Musk is already under investigation for his conduct regarding Tesla and Twitter, it seems unlikely to be a hat trick,” he added.

(This story has been reclassified to add the deleted word “up” in paragraph 3)

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Reporting by Katanga Johnson and Michelle Price; edited by Grant McCool

Our standards: The Thomson Reuters Trust Principles.

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