While the U.S. securities regulator is expected to investigate Elon Musk’s tweet in which he joked about purchasing the New York-listed soccer team Manchester United (NYSE:MANU), legal experts think the jest is unlikely to get him in legal trouble.
Musk’s ‘ManU’ Tweet
Musk, the world’s richest person, briefly eased the gloom over the club’s shares by tweeting to his 103 million followers on Tuesday, “I’m buying Manchester United ur (sic) welcome,”, adding later that it was a joke.
Nevertheless, the 51-year-old CEO of Tesla’s remarks sparked a surge in Manchester United shares (NYSE:MANU), which temporarily climbed as high as 17% in after-hours trading before closing Wednesday at $13.67, an increase of about 7% from Tuesday’s close.
Musk has a history of influencing stocks and cryptocurrencies with his tweets and has been in a fight with the U.S. Securities and Exchange Commission (SEC) since he tweeted in 2018 that he had secured money to take Tesla (NASDAQ:TSLA) private, despite the SEC’s conclusion that he did not.
According to court and regulatory papers, the SEC is conducting multiple investigations into Musk’s following comments regarding Tesla (NASDAQ:TSLA) and has questioned others about his $44 billion proposal to acquire Twitter (NYSE:TWTR), which he is currently engaged in a legal battle to terminate.
Given the share price movement and Musk’s history of circumventing U.S. securities regulations, legal experts predict that the SEC will investigate the tweets about ManU, joke or not.
This may have been a joke to some, but not to the regulators, said Jacob Frenkel, a former SEC employee and attorney at Dickinson Wright in Washington. “Regulators will want to know what prompted the tweets, Frenkel said, adding that they will likely scrutinize trade based on the tweet.
According to Hui Chen, a compliance expert, and former Justice Department attorney, regulators would be interested in proof that Musk attempted to influence the market intentionally or irresponsibly.
Musk does not have the same legal obligations to Manchester United (NYSE:MANU)shareholders as he does to Tesla shareholders (NASDAQ:TSLA), and there is no indication that he or anybody close to him has a significant financial interest in the soccer club.
And while Musk’s comments on Tesla (NASDAQ:TSLA)are subject to special legal checks as part of a deal he struck with the SEC to resolve its allegations that his 2018 “funding secured” tweet violated the agency’s rules, U.S. free speech protections afford Musk ample latitude to comment on issues other than his electric car company.
In addition, his confirmation that the Manchester United (NYSE:MANU) post was a jest answers the question of his intentions.
Based on the existing evidence, it is improbable that the SEC could prove that he attempted to commit securities fraud, according to many attorneys.
Others opined that Musk’s history of wacky Twitter commentary – which has ranged from an April Fool’s Day joke about Tesla (NASDAQ:TSLA) going bankrupt to aliens and zombies – may be used in his defense, should regulators or other parties take issue with the remark.
Howard Fischer, a New York-based partner at Moses & Singer, argues that investors now know to view Musk’s comments with skepticism.
While Musk is already under investigation for his behavior regarding Tesla (NASDAQ:TSLA) and Twitter (NYSE:TWTR), it seems unlikely that this will make it a hat trick, he continued.
Featured Image: Megapixl @Bnoragitt
