Elon Musk stated  that Twitter's legal team accused him of violating a non-disclosure agreement by revealing in a tweet that the sample size for the social media platform's checks on bot accounts is 100. This came just a few days after he tweeted that his deal to acquire Twitter was 'temporarily on hold' while he awaited data on the proportion of fake accounts. Jacob Frenkel, chair of government investigations and securities enforcement practice at Dickinson Wright PLLC, joined Cheddar's Opening Bell to discuss. I mean ultimately what we really may be dealing with here is a fair amount of posturing given maybe some discomfort about the change in the price of the stock, change of conditions, and an effort on his part, ultimately, to try to push down the ultimate acquisition price," he said. "I think it's premature to suggest that the transaction is actually in jeopardy, and in many respects at this point I'm almost much more interested in the SEC's investigation that was reported last week around beneficial ownership disclosure and the timing around that."

Opening Bell

Musk May Be 'Posturing' Amid Reveal of Twitter NDA Violation Accusation

for more on this spring. And Jacob frenkel, former sec lawyer and chair of government investigations and security enforcement practices at Dickinson wright? P. L. L. C. Jacob Elon musk is now being accused of violating a twitter as an N. D. A. For sharing this information. What do you make of this? Do you think this actually puts the deal in any sort of real peril? I think it's much too early to look at this deal as being as being in peril. I think with mr musk there's always a lot of excitement around the transaction. I mean what we're hearing is what mr musk is saying that twitter's lawyers are saying we're hearing from twitter lawyers were not hearing from mr musk lawyers. I mean ultimately what we really may be dealing with here is a fair amount of posturing given maybe some discomfort about the change in the price, of the stock change of conditions and an effort on his part, ultimately try to push down the ultimate acquisition price. Um I don't I think it's premature to suggest that the transaction is actually in jeopardy. And in many respects at this point I'm almost much more interested in the sec? S investigation that was reported last week around beneficial ownership disclosure and the timing around that because there you're getting into the disclosure side of the of the issue and the timing of that disclosure by him rather than you know the back and forth. That often takes place in the course of a corporate transaction particularly one of this size. Let's talk about about the sec s kind of investigation or potentially investigations. Right. Because this kind of talk on twitter in terms of this deal really has caused just a ton of volatility in twitter stock as a result. And I wonder if even just this posturing as you called, it puts Elon musk in further hot water with the sec amid the kind of hot water situation that has already in around disclosure. Well yeah, that's a great question. It really covers a lot of issues. You know, I mean the the issue involving Tesla in 2018 2019 was whether his statements about about Tesla, uh you know, somehow involved manipulating the price of the security. I don't really seeing that being the issue here. I think the issue here was, you know, it was in March that the band began acquiring the stock. The law is very clear. It's a strict liability statute meaning if you violate, it's almost like a speed limit. You know, if you go faster than the speed limit, you're in violation of the law. It doesn't mean it gets enforced. But the violation exists. That's true. Somebody owns more than 5% of the stock of a public company. They're required to disclose that the faculty went from 5% to 9%. It was only the 9% threshold he made that disclosure and in the process probably saved somewhere between 100 million $150 million dollars in the transaction. That gives rise to a number of issues for the sec one is the actual filing too. When did he actually have the intent to shift from passive to active because that's an entirely separate disclosure issue for him And you could, you could, you could, you just tell me really quickly in terms of what's the possible penalty here and for a billionaire like Elon musk is that penalty? Really one that has true bite. That's a that's a that's a great question because we've already seen him try to back away from the previous injunction. The answer is probably not. It does not have real bite but there comes a point where regardless of somebody's affluence and stature repeated hits from a regulator like the sec really does have a reputational impact. And I think that goes back to your original question about whether this transaction is going to survive if he looks for a reason to undermine the transaction and to try to walk away the next time Elon musk is trying to make some major acquisition. The first question is going to be, is this guy for real, you know, are you know, is he playing with us the same way he played with twitter? That's not to suggest he's not interested in moving forward with twitter but but to your point, you know, he views the sec as a nuisance and the real question is going to be whether the sec has the stomach to take him on. I'm running a long time with you. So I want to jump to this kind of question. The reality is that this this deal to some extent, at least in the mind of some people is up in the air. Do you really think that's the case and if it is and and Elon musk decides to pull out, is it really as simple as you know, paying the fine or they're really gonna be um some challenges in terms of pulling out of this deal? I think, I think if you if you were to accept this deal, there will be there will be a major breach of contract lawsuit from twitter, there will be shareholder litigation, but as I've indicated, I really think it's premature for the public really to be begin thinking that mr musk is looking to walk away from this deal. How would he do? So, in terms of like if he wanted to walk away from this deal, do you think that's anything that again, you're saying it's not really on the table right now, but how would he do so, would it be a matter of saying, hey, this issue with the box is enough to kind of call it quits? Well, I think, you know, we haven't, none of us have seen the nondisclosure agreement in the terms of the actual agreement to figure out what are the breakup points that would enable him to walk away from the deal. I mean, I think a lot of that would have been spelled out and is spelled out any agreement between him and twitter and I think, you know, his lawyers will you know, will look, you will assert that there were material misrepresentations made to him about twitter. But ultimately I really think what's going on here as well as much around repositioning and trying to negotiate, renegotiate the price of the stock. We've seen that before historically and I think that's what's going on here. I think I'm in the same camp with you. Jacob really appreciate your time and your insight. Jacob, franco former sec lawyer and chair, government investigations and security enforcement practices at Dickinson Wright, PLLC.