While the US securities regulator is likely to examine Elon Musk'sMusk's tweet in which he joked about buying New York-listed soccer club Manchester United, legal experts say that the crack is unlikely to land him in hot water.
Musk, the world's richest person, tweeted on Tuesday that he was buying Manchester United ur sic welcome, to his 103 million followers, and later added that it was a joke. The 51-year-old Tesla CEO's musings ignited Manchester United shares, which briefly jumped as much as 17% in the after hours trading before ending Wednesday at $13.67, up nearly 7% on Tuesday's close.
Musk has a history of moving stocks and cryptocurrencies with his tweets and has been locked in a feud with the US Securities and Exchange Commission SEC in 2018 because he believed he had funding secured to take Tesla private when the SEC concluded he did not.
The SEC has a number of open investigations into Musk's subsequent tweets about Tesla and has queried others about his $44 billion deal to buy Twitter itself, which he is now embroiled in a legal fight to exit, according to court and regulatory filings.
The tweets are likely to attract scrutiny from the SEC, given the share price move and Musk's history of skirting US securities rules, legal experts said.
Jacob Frenkel, a Washington-based attorney at Dickinson Wright and a former SEC official, said this may have been a joke to some, but it won't be to the regulators. Frenkel said that regulators would take a hard look at trading around the tweet and that they will want to know what motivated the tweets.
Hui Chen, a compliance consultant and former Justice Department lawyer, said regulators would be interested if there was evidence that Musk tried to manipulate the market.
The SEC didn't want to make a statement. Attorneys for Musk didn't respond to a request for comment.
The bar for pursuing enforcement action is high, according to several other attorneys.
Since he is not a Manchester United executive, he does not have the same legal obligations to shareholders as he does to those of Tesla, and there is no indication that he or anyone close to him has a major financial interest in the soccer club.
While Musk's comments on Tesla were subject to special legal checks under a deal he struck with the SEC to resolve his allegations that his 2018 funding secured tweet broke the agency's rules, US free speech protections give Musk plenty of leeway to comment on issues beyond his electric carmaker.
His clarification that the tweet on Manchester United was a joke addresses the question of his intentions.
According to several attorneys, it is unlikely that the SEC would be able to prove that he was trying to commit securities fraud.
Robert Frenchman, a partner at Mukasey Frenchman LLP, said that it would be difficult to prove that Musk acted with intent to deceive.
Other people said that Musk's track record of whimsical twitter commentary - which ranged from an April Fool's Day quip about Tesla going bankrupt to aliens and the zombie apocalypse - could also be cited in his defense, if regulators or other parties took issue with the tweet.
Howard Fischer, a partner at Moses Singer in New York, said it was arguable that investors now know to treat Musk's tweets with caution.
He said that while Musk is already under investigation for his conduct relating to Tesla and Twitter, it appears unlikely that this will make it a hat trick.