Podcast Summary: Shareholder Primacy – "Musk Securities Fraud; Warner Brothers Discovery Update"

Date: February 18, 2026
Hosts: Mike Levin (Activist Investor), Ann Lipton (Professor, University of Colorado Law)
Produced by: Free Float Media Inc.

Episode Overview

In this episode, Mike Levin and Ann Lipton return after a short break to cover two major topics at the intersection of activism, market dynamics, and securities law:

1. The ongoing securities fraud litigation against Elon Musk related to his acquisition of Twitter (now X), focusing on a California federal case that’s heading to trial.
2. New developments in the Warner Brothers Discovery (WBD) sale process, with competing bids from Netflix and Paramount/Skydance, and the ensuing activism and intrigue impacting the deal.

The tone is analytical, slightly irreverent, and laced with real-world perspectives from both finance and legal angles.

Key Discussion Points and Insights

1. The Musk/Twitter Securities Fraud Lawsuits

Background ([02:06]–[03:05])

• There are two major securities fraud cases pending against Elon Musk regarding his Twitter acquisition: one in New York (previously discussed in April 2025) and another in California, which is set for trial in March.
• The central claim: Musk made false public statements (mainly via Twitter/X) about spam accounts on Twitter to depress the share price, intending to either back out of the deal or renegotiate.

Allegations and Legal Details ([03:07]–[09:00])

• Plaintiffs’ Claims: Musk artificially drove down Twitter’s stock price via public allegations about spam accounts, causing investors to sell at depressed prices.
• The Class: Encompasses Twitter shareholders who sold during the period when Musk was publicly challenging the deal and thus missed out on the final $54.20/share price.
• Elements to Prove:
  • Musk’s statements on spam accounts and the "deal on hold" were false.
  • These statements were made intentionally or recklessly.
  • The resulting market effect led to real losses for selling shareholders.

Legal Complexity: Opinion vs. Fact, Market Knowledge ([09:00]–[13:29])

• The plaintiffs must show Musk’s statements were more than opinion—they must establish falsity and intent.
• A "high bar" exists for proving falsity when the statement could be interpreted as opinion (Ann and Mike discuss the nuances here).
• The merger agreement was public, making it harder to argue that investors were misled about Musk’s contractual rights.
• Quote:
  • “There’s a real question whether anyone actually believed Musk was making a good faith statement about Twitter spam, in which case he fooled the market, or did they believe he was just getting cold feet and throwing stuff at the wall?” – Ann [13:03]

Defense Mishaps and Legal Strategy Failures ([14:13]–[16:32])

• Musk’s legal team failed to robustly argue (especially in writing) that the market understood the true situation because of public access to the merger agreement. Instead, they made this point late and weakly at oral argument, which Judge Charles Breyer rejected.
• Now that defense is largely foreclosed at trial, illustrating the importance of timely and thorough legal strategy.
• Notable Moment:
  • “Musk’s attorneys, they absolutely bollocks this up... It was just enough to not persuade the court and bar them from making it again.” – Ann, paraphrased by Mike [14:21]

Upcoming Trial and Broader Implications ([16:32]–[16:56])

• The case is set for trial in March in California federal court.
• Separate New York lawsuit (regarding 13D disclosures) is also ongoing.
• Both illustrate complex questions about disclosure, intent, and public understanding in high-stakes mergers.

2. Warner Brothers Discovery Sale: Activist Drama & Deal Dynamics

Bidding Situation: Netflix vs. Paramount/Skydance ([17:54]–[21:29])

• Netflix’s Offer: $27.75/share, buys only the studio and HBO (excluding cable assets).
• Paramount/Skydance (also "Peace Guy"): $30/share for the entire company, including legacy cable businesses.
  • Both offers are all-cash.

Enhancements by Paramount/Skydance ([21:29]–[25:19])

• Breakup Fee: Paramount/Skydance will fund any breakup fees (currently $2.8B) triggered by Warner reneging on the Netflix deal.
• Debt Backstop: They’ve offered to backstop potential debt needed for remaining WBD cable assets.
• "Ticking Fee": New mechanism—$0.25/share per quarter (approx. $650M/year) paid if closing is delayed beyond Dec 31, 2026, to compensate for regulatory slippage.
  • Quote:
    • "I haven't seen a ton of ticking fee kind of deals." – Mike [23:14]
    • Ann: “JetBlue-Spirit did the same thing.” [23:20]

Deal Certainty and Shareholder Activism ([25:19]–[33:50])

• Regulatory and Approval Hurdles: Warner Brothers must still call a shareholder vote; waiting for a final proxy and possibly SEC approval, which is rumored to be politicized.
• Board Nomination Dynamics: Proxy window for nominating directors has closed (Feb 2), but potentially confidential campaigns could still be underway.
• Activist Efforts:
  • Paramount/Skydance is actively encouraging shareholders to reject the Netflix deal, seeking public opposition.
  • Notable Activist:
    • Ancora Fund (Cleveland-based activist led by Jim Chadwick) made a $200M share purchase and issued a detailed, public 51-page analysis supporting Skydance, opposing Netflix.
    • Quote:
      • "They wrote like a 51 page PowerPoint document point by point... that's going to be an exhibit in my next M&A class." – Ann [30:55]
  • Other funds (e.g., Sachem Head) have reportedly built positions but not publicly disclosed their stances.

Broader Context: Political and Regulatory Maneuvering ([33:50]–[34:47])

• Regulatory uncertainty may hinge as much on political considerations as legal antitrust issues.
  • “The reason the regulatory approval is up in the air... a lot of it is political.” – Ann [33:50]
• Reports of political allies (e.g., friends of Larry Ellison) lobbying the SEC to slow the process.

Next Steps, Possible Higher Bids ([34:47]–[35:53])

• Rumor has it Warner is now reconsidering (reopening talks with Paramount/Skydance), perhaps due to activist pressure and the structure of new compensation for deal risk.
• Both sides may increase their bids soon.

Notable Quotes & Memorable Moments

• On Musk’s antics:
  • “Musk had ordered his attorneys. He didn't care about spam. He did not give a shit. He... asked his attorneys for 'Find me some loophole.'” – Mike [12:04]
• On legal strategy:
  • “Musk’s attorneys, they absolutely bollocks this up. There’s really no other way to put it. This is just hilarious.” – Ann [14:20]
• Matt Levine cited in litigation:
  • “Matt Levine, I remember this quote because I loved it, referred to Musk’s... ‘transparent and smirking bad faith.’” – Ann [13:01]
• On activist pressure in M&A:
  • “Normally activists do this kind of stuff for our nominees... but this is like somebody basically put them up to this.” – Mike [31:01]

Timestamps of Key Segments

• [02:06] – Musk/Twitter lawsuits introduced
• [05:53] – Pampena v. Musk: the California class action begins
• [13:03] – The market’s true beliefs and quoted "smirking bad faith"
• [14:13] – Musk’s legal team’s fatal misstep
• [17:54] – Transition to Warner Brothers Discovery deal update
• [21:29] – Skydance offer enhancements (breakup fee, ticking fee)
• [25:19] – State of regulatory/shareholder approval, activism builds
• [30:39] – Ancora Fund’s public activist campaign
• [33:50] – Regulatory/political angles cloud deal outcome
• [34:47] – Warner reopens talks; bidding war looms

Summary Table: Warner Brothers Discovery Deal Offers

| Bidder | Price/Share | Assets Bought | Special Provisions | |-----------------|-------------|---------------------------|-----------------------------| | Netflix | $27.75 | Movie Studio + HBO only | No ticking fee; break fee | | Paramount/Skydance | $30 | Entire company (incl. cable) | Pays breakup fee, backstops debt, ticking fee of $0.25/share/quarter after Dec 2026 |

Takeaway

The episode highlights how personalities, legal strategy, and market perception shape securities litigation (Musk/Twitter) and major M&A battles (WBD). Both cases illustrate how public disclosure, legal frameworks, regulatory uncertainty, and increasingly personalized activist strategies collide in high-stakes transactions.

Hosts promise further updates as both stories, especially the fast-moving WBD saga, continue to develop.