Tesla investors say Elon Musk’s tweets cost them billions. His trial begins today Pipa News

Tesla investors say Elon Musk’s tweets cost them billions. His trial begins today

While still grappling with the fallout from a company he did delist, beleaguered billionaire Elon Musk now faces a lawsuit over a company he failed to acquire.

Long before Musk bought Twitter for $44 billion in October, he had set his sights on Tesla, the electric car maker where he still serves as CEO and from which he derives most of his wealth and fame.

Musk claimed in an August 7, 2018 tweet that he had “secured funding” to pay for a $72 billion buyout of Tesla, which he then reinforced with a follow-up statement that made a deal seem imminent.

But the buyout never went through and now Musk will have to explain his actions under oath in a US federal court in San Francisco. The process, which begins Tuesday with jury selection, was triggered by a class action lawsuit on behalf of investors who owned Tesla stock for a period of 10 days in August 2018.

Shareholders did not specify the damage, but said Musk’s tweets cost investors “billions”.

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Musk’s 2018 tweets sent Tesla’s stock price soaring, which ended abruptly a week later after it became clear he lacked the funding for a buyout. That resulted in him scrapping his plan to take the automaker private, culminating in a $40 million settlement with U.S. securities regulators that also forced him to step down as the company’s chairman.

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Musk has since claimed he entered into that settlement under duress, claiming he believed he had locked in financial support for a Tesla buyout during meetings with Saudi Arabia’s Public Investment Fund representatives.

The outcome of the trial may depend on the jury’s interpretation of Musk’s motive for tweets that U.S. District Judge Edward Chen has already ruled were false and “reckless.”

Chen on Friday rejected Musk’s offer to transfer the lawsuit to a federal court in Texas, where Tesla moved its headquarters in 2021. Musk had argued that negative coverage of his Twitter purchase had poisoned the jury pool in the San Francisco Bay Area.

Musk’s leadership on Twitter — where he has gutted the workforce and alienated users and advertisers — has proved unpopular with Tesla’s current shareholders, who fear he has spent less time steering the automaker in a time of increasing competition .

Those concerns contributed to a 65 percent drop in Tesla’s stock last year, wiping out more than $700 billion in shareholder wealth — far more than the $14 billion swing in fortune that occurred during the August 2018 period that fell in the 1990s. class action lawsuit was heard.

The lawsuit is based on the premise that Tesla’s stock wouldn’t have traded so widely if Musk hadn’t balked at the prospect of buying the company for $420 a share. Shares closed at $122.40 last week.

Famous names on witness list

After Musk dropped the idea of ​​a Tesla buyout, the company overcame a manufacturing problem, resulting in a rapid surge in car sales that sent his stock soaring and made Musk the richest person in the world until he bought Twitter.

The trial is likely to provide insight into Musk’s management style, as the witness list includes some of Tesla’s current and former top executives and board members, including Oracle co-founder Larry Ellison, as well as James Murdoch, the son of media mogul Rupert Murdoch.

The drama may also shed light on Musk’s relationship with his brother Kimbal, who is also on the list of potential witnesses in a trial scheduled to end Feb. 1.

It is unusual for such a case to lead to a verdict. Hundreds of U.S. securities class actions have been filed each year since 1996, but only 15 have resulted in judgments since then, according to law firm Wolf Popper.

About half are fired for non-compliance with securities laws, and most of the rest are settled.

Musk, also CEO of SpaceX and co-founder of companies OpenAI and Neuralink, is no stranger to the courtroom.

He defeated a 2019 libel suit before a California jury over claims he defamed a cave explorer from Thailand’s famed rescue when he called the man “pedo dude” in a tweet.

He also won a bench trial last year in Delaware’s Court of Chancery over allegations from Tesla shareholders that he allegedly forced Tesla’s board to buy SolarCity, a rooftop solar manufacturer. Tesla shareholders have appealed the verdict.

Last year, he fought an ultimately losing battle to get out of his deal to buy Twitter, defending his $56 billion Tesla salary in a lawsuit. Both were in the same court in Delaware and a ruling on his pay package is expected later this year.

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