Can a CEO’s tweet give rise to liability under the securities laws?

Hypothetical:  

The CEO (Tusk) of a public company (Mesla) tweeted to her twenty million followers: “Am considering taking Mesla private at $240. Funding secured.”  This tweet caused Mesla’s stock price to jump by over six percent. Tusk had never discussed a going-private transaction at $240 per share with any potential funding source. And Tusk had not confirmed the support of Mesla’s investors for a potential going-private transaction.

Key Considerations:

  • Tusk’s public tweet could create the misleading impressing that taking Mesla private was subject only to Tusk’s choosing and not subject to any contingencies. 
  • This potentially misleading tweet could cause confusion and disruption in the market for Mesla’s stock and result in harm to investors.
  • A company should file a Form 8-K with the SEC stating an intent to use a Twitter account as a means of announcing material information to the public about the company and its products or services.
  • Additionally, a company should set up sufficient processes to make sure that tweets are accurate and complete before being posted.  A company should have disclosure controls and procedures in place to determine whether tweets contain information required to be disclosed in SEC filings.

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