According to a report from Fortune, Elon Musk may face SEC trouble for blocking naysayers, critics, and journalists on Twitter.
Tesla CEO Elon Musk recently tweeted that he was “considering taking Tesla private” and that he had gained funding to do so, now it appears that tweeting such market-influencing details may not be entirely legal due to Musk’s history of blocking users. Twitter has been a legitimate channel for investor communication since 2013 when the Securities and Exchange Commission (SEC) stated that the social media platform as a valid disclosure method as long as companies warned investors prior to posting on the platform.
Tesla agreed to these terms, at one point instructing investors in November 2013 to “follow Elon Musk’s and Tesla’s Twitter accounts” for more information. But now, it appears that Musk’s blocking of users that bother him on the platform may undermine the company’s current situation with the SEC. If Twiter is seen as a disclosure method, tweets on the platform are subject to disclosure requirements defined in an SEC rule called Regulation FD. According to the rule, company communication methods must be “reasonably designed to provide broad, non-exclusionary distribution of the information to the public.” Blocking users on Twitter means that they are being excluded from the information distribution.
Michael Liftik, a former deputy chief of staff of the SEC, who helped conduct the 2013 social media inquiry, discussed the current situation with Musk stating: “The point is to just make sure everyone knows. 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.”
Musk has blocked at least three dozen people including investors, journalists and famous short-seller Mark Spiegel, who has been vocally critical of Tesla. “If he blocks anyone who says anything negative about Tesla — you say ‘I don’t like your cars,’ you’re blocked — and he really has a pattern of blocking a lot of people, I do think that raises particular questions about whether he has turned that open channel back into a selective channel,” Liftik stated.
Spiegel, for example, learned of Musk’s plan to take Tesla private when he saw “the jump in the stock and then the headlines.” Spiegel told Fortune.com “He’s blocked me for years. I have to use a separate web browser and ID to follow him… As in the Trump ruling, [Musk] should be forced to ‘mute’ and not ‘block,’” referencing a court ruling that stated President Trump must mute those he wishes not to speak to, not block them from his profile.
George Canellos, then acting director of the SEC’s division of enforcement, said in a 2013 statement relating to social media: “One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information… Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”