Elon Musk is apparently the target of new subpoena activity aimed at investigating how the world-renowned tech mogul used communications to potentially affect assets that regulators might see as securities.
Craig Trudell at Bloomberg reports the SEC is looking into securities fraud allegations around Musk’s teaser in November that he had the funding to take the company Tesla company private (at a price of $420 per share).
“The SEC issued the subpoena Nov. 16, seeking information about Tesla’s governance processes and compliance with a settlement reached with the agency in September 2018, the company said in a regulatory filing,” Trudell writes.
Trudell also reports on a Twitter poll that Musk did in November asking if he should sell 10% of his stake.
A resulting plunge in Tesla stock price showed how one man’s outsized influence in the markets can affect a major blue-chip company.
Now, regulators are seeking to restrict the ways that Musk can talk about his companies and his assets on social media.
How common is it for CEOs to use social media to talk about companies in the first place?
Research shows that it is something that’s commonly done.
“Social media has become an increasingly relevant and cost-effective way for organizations to build their brand and their business,” write researchers at the University of Florida school of journalism in a survey of relevant executive activity. “The demand for an organization to have an online presence is acute as both the general public and stakeholders become increasingly visible online, and expect the same from corporate leadership. … The researchers found that, overall, Fortune CEOs posted more links to their companies’ official websites, and posted significantly more about company vision, mission, and goals than their startup counterparts. They were better at applying social media presence strategies in a way that was interactive and cohesive. They expressed more emotions in their posts, using specific appeals such as joy and love, were more positive overall, and posted more on company and CEO news and events, as well as products, services and general greetings, wishes, and acknowledgements.”
Interestingly, the SEC is also looking at whether certain crypto digital assets can be labeled securities.
Musk has a lot of influence here as well – remember the Saturday Night Live appearance last year that spike the price of Dogecoin.
So what’s ahead for this conflict? It’s likely that Musk will continue to make headlines in terms of his communications in the ways that he chooses to talk about markets over which he has a direct kind of power. Stay tuned