Finance, Technology

Twitter Price Manipulation Could Cost Tesla $162M

A small rounding error for Musk, a giant contingency fee for lawyer-kind.

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(Photo by Justin Sullivan/Getty Images)

JPMorgan recently filed a $162M suit against Tesla over breach of contract. The cause of action stems from a bit of Twitter Trolling™ (read: market manipulation) that directly led to $TSLA increases. Given that a court has already ruled a causal connection between Musk’s tweets and the price change, this looks like a suit that may resolve in JPMorgan’s favor. Below are the scandalous tweet and an excerpt of the complaint:

On August 7, 2018, Tesla’s CEO Elon Musk announced such a significant corporate transaction via Twitter, tweeting “Am considering taking Tesla private at $420. Funding secured.” In the weeks that immediately followed the August 7 announcement, Tesla made additional statements and took various additional actions confirming it was considering a going-private transaction, including hiring advisors and forming a special committee of its board. Although the SEC later revealed—in a securities fraud complaint alleging that Mr. Musk’s tweets were false and intended to mislead the market—that there had never been a firm offer to take Tesla private, that was not known at the time. Rather, Tesla’s August 7 announcement caused immediate and significant economic effects as the market attempted to price in the likelihood of Tesla going private and making a tender offer at $420. Those economic effects substantially decreased the value of the warrants. As required by the terms of the governing agreements, JPMorgan appropriately reduced the warrant strike price on August 15 to maintain the same fair market value as the warrants had before Tesla’s announcement.

If you were looking for a sign that you shouldn’t make that tweet about HODLing whatever flavor of the week stock going to the moon, maybe this is it. We are still getting our legal minds around how mass media can change the economic and civil consequences of our Twitter fingers. Elon is one of the richest men in… history frankly, not to mention he’s got a lot of followers and there was a written contract that was capable of being breached. It’s no surprise that the 280-character musings he shares could be worthy a courtroom’s center stage. But who knows what will count as market manipulation in the future? Who will be liable? Twenty years from now, will we tell our mentees Wild Wild West stories about the time when wildly illegal things like billionaires tweeting about their speculative stock prices or the masses mobilizing to make bank off of shorting hedge funds were just a Tuesday? Time will tell.

Judge Deems Musk’s ‘Funding Secured’ Tweet False And Misleading. A Trial Awaits [LA Times]

JPMorgan v. Tesla [Complaint]

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Chris Williams became a social media manager and assistant editor for Above the Law in June 2021. Prior to joining the staff, he moonlighted as a minor Memelord™ in the Facebook group Law School Memes for Edgy T14s. Before that, he wrote columns for an online magazine named The Muse Collaborative under the pen name Knehmo. He endured the great state of Missouri long enough to graduate from Washington University in St. Louis School of Law. He is a former boatbuilder who cannot swim, a published author on critical race theory, philosophy, and humor, and has a love for cycling that occasionally annoys his peers. You can reach him by email at cwilliams@abovethelaw.com and by tweet at @WritesForRent.

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