Judge refuses to strike down Elon Musk’s settlement with the S.E.C. over his Twitter posts.
Elon Musk could soon own Twitter, but his own use of the platform will remain constrained by a 2018 agreement he signed with securities regulators.
A federal judge in New York denied a request by Mr. Musk to end the agreement, which requires him to run his social media posts by a company lawyer if the statements contained material information about his electric car company, Tesla.
Mr. Musk had argued that the agreement to settle accusations of securities violations infringed on his right to freedom of speech and that the Securities and Exchange Commission had used the agreement as an excuse to “launch endless, boundless” investigations of his public statements. He claimed he accepted the settlement in the first place only because the litigation would have put too much financial pressure on Tesla.
“None of the arguments hold water,” Judge Lewis J. Liman of the U.S. District Court for the Southern District of New York wrote in a ruling issued Wednesday that dismissed Mr. Musk’s claims.
Mr. Musk’s assertion that he agreed to the S.E.C.’s conditions because of the financial burden was “wholly unpersuasive,” Judge Liman wrote. Mr. Musk, the judge said, “was already a multibillionaire in 2018 and one of the wealthiest individuals in the world.”
Alex Spiro, a lawyer at the firm Quinn Emanuel Urquhart & Sullivan who represents Mr. Musk, suggested that an appeal was likely.
“Nothing will ever change the truth, which is that Elon Musk was considering taking Tesla private and could have — all that’s left some half decade later is remnant litigation which will continue to make that truth clearer and clearer,” Mr. Spiro said in a statement, adding, “Stay tuned.” He declined to comment further.
The decision came two days after Twitter’s board agreed to sell the company to Mr. Musk for $44 billion — a transaction that still has to win the approval of shareholders. He had previously criticized the social network of censoring free speech and has said he thinks people should be allowed to speak more freely on Twitter, which in recent years has sought to restrict misinformation, hate speech and other problematic statements on its platform.
Tesla shareholders, who don’t get to vote on the Twitter acquisition, appear not to be in favor of Mr. Musk’s proposed acquisition. Tesla’s stock price has fallen 17 percent since the beginning of April. The drop reflects investor concern about Mr. Musk’s use of Tesla shares as collateral for bank loans and the risk that overseeing Twitter could distract him from the car business.
The court ruling was the latest round in Mr. Musk’s long-running battle with the S.E.C., an agency he has frequently mocked. The dispute at issue Wednesday has its roots in a Twitter post by Mr. Musk in 2018 asserting he had “secured” enough money to take Tesla private. It was later revealed that he had only had preliminary discussions with investors. The S.E.C. sued him for fraud.
How Elon Musk Bought Twitter
A blockbuster deal. Elon Musk, the world’s wealthiest man, capped what seemed an improbable attempt by the famously mercurial billionaire to buy Twitter for roughly $44 billion. Here’s how the deal unfolded:
As part of an agreement to settle that civil suit, Mr. Musk agreed to clear his social media posts with company lawyers. Mr. Musk, notorious for his freewheeling public statements, clearly chafed at the restriction and was accused of violating it several times.
Mr. Musk cannot get out of the agreement “by simply bemoaning that he felt like he had to agree to it at the time but now — once the specter of the litigation is a distant memory and his company has become, in his estimation, all but invincible — wishes that he had not,” Judge Liman wrote.