This video is a segment from a BBC TV interview. The full show is not yet available online as of the time of this publication.
The video discusses the recent lawsuit against Elon Musk regarding a tweet he made regarding taking Tesla company private. Tony Nash is being interviewed by the BBC to discuss the impact of this lawsuit on CEO communications and investor relations.
Tony mentions that many legal experts believed that Elon Musk was going to be found guilty for his tweet. He considers the tweet to be stupid, but not intentionally misleading. However, the impact of the tweet was damaging to shareholders.
Tony says that the share price of the company has risen over the last four years, despite the lawsuit, and the plaintiffs in the lawsuit were not able to prove that they lost billions of dollars.
Tony also mentions that the SEC has fined both Twitter and Elon Musk for the tweet. He says that this enforcement of regulatory laws will change the way that CEOs communicate with the public, especially in tech companies. CEOs may become more informal in their statements, even if their claims may not be true. This will make it more difficult for investors, who will have to be more cautious and do their research before making any decisions.
Tony mentions that the outcome of the lawsuit shows that executives can be more careless in their communications going forward. He says that while $40 million fine is not a significant amount, it may still lead to a reprimand from the SEC. He advises investors to be careful and do their research before taking positions in the market.
I know a lot of legal experts thought that he was going to be found guilty. It was a stupid tweet. I think he would take it back. He wouldn’t admit that, but I think he probably would if he could do it over again. But I think it does make the landscape pretty crazy going forward where executives can say things publicly that they would be very careful of saying before. So if you’re an investor, I think you now have to look at the formal declarations, regulatory filings to find out real information. Musk has just made this an incredibly informal way of talking with people.
So you think stupid, not intentionally misleading, but it proved very damaging, of course, to the shareholders?
It did. The share price has done very well since 2018. So I don’t know what these guys were investing in to lose billions of dollars, unless it was some sort of exotic maybe option or something like that. The shares have risen over the last four years. If those plaintiffs, some of the statements that they made said they were trying to look out for their well being, these sorts of things, well, the share price has delivered over the long term. So the SEC has fined Twitter and Musk. So in terms of a regulatory environment, that’s been enforced. But did they prove that they lost billions of dollars? Obviously they didn’t because this was a jury trial.
Do you think this will change the way that Elon Musk tweets, or will it change the way that other CEOs tweet in future?
Sure, I think the voice of the CEO now can get more informal and I think especially in tech companies, I think you’ll see CEOs becoming very informal and making claims, even if they can justifiably say, “well, I thought that this was going to happen.” Right. And this is what Musk defense as well. “I reasonably thought this was going to happen, but it didn’t happen, so oh, well.” I think especially in tech, you’ll see CEOs make claims that may or may not be true, but they’re leading in that direction. So investors are just going to have to be much more wary and they’re going to have to do their research before they make take positions in markets.
But surely now that Elon Musk has done this and he’s had this, I mean, it’s a reprimand, isn’t it? It’s a public reprimand. Even if he was found not guilty, people will have to be very careful. They won’t have the same defense because of what has happened to Elon Musk here.
Right, they won’t. And again, I think it’s from a regulatory perspective and from, let’s say in investor relations or communications perspective, it all of a sudden it’s the Wild West kind of you can kind of say what you want. You can kind of say, I think we’re going to go private at a certain price, and if it doesn’t happen, you just kind of shrug your shoulders and go, well, it didn’t work out. And again, you may get a slap on the wrist. $40 million isn’t really a slap on the wrist, but you can get a slap on the wrist from the SEC. But investors again, investors have to be very careful, and investors have to do their research before taking positions. And this is really what the basis of the lawsuit was about. So those executives, I guess, can be a bit more careless in their communications. I guess that’s what it tells me with the finding of the suit, is executives can be a bit more careless with their communications.