Elon Musk will be tried for his tweets about Tesla

Elon Musk will be tried for his tweets about Tesla

Elon Musk will be tried for his tweets about Tesla

Still grappling with the fallout from a business he privatized, embattled billionaire Elon Musk now faces a lawsuit over a business he doesn’t have.

Long before Musk bought Twitter for $44 billion in October, he had set his sights on Tesla, the electric carmaker of which he continues to be CEO and from which he derives most of his wealth and fame. . Musk claimed in a tweet on August 7, 2018 that he had lined up funding to pay for a $72 billion takeover of Tesla, which he then amplified with a follow-up statement which made a deal seem imminent.

But the takeover never materialized and Musk will now have to explain his actions under oath in federal court in San Francisco. The trial, which begins Tuesday with jury selection, was sparked by a class action lawsuit on behalf of investors who held Tesla stock for a 10-day period in August 2018.

SEC fine

Musk’s tweets at the time fueled a rally in Tesla’s share price that ended abruptly a week later after it became clear he ultimately didn’t have the funding for a redemption. This led him to abandon his plan to privatize the automaker, resulting in a $40 million settlement with US securities regulators who also forced him to resign as chairman of the company.

Musk has since claimed he entered the settlement under duress and said he believed he secured financial backing for a Tesla takeover during meetings with officials from Saudi Arabia’s Public Investment Fund.

The outcome of the trial could hinge on the jury’s interpretation of Musk’s motive for the tweets that U.S. District Judge Edward Chen has previously ruled to be false.

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

Musk’s leadership of Twitter – where he’s gutted staff and alienated users and advertisers – has proven unpopular among current Tesla shareholders, who fear he’s spending less time running the automaker at a time where competition intensifies.

These concerns contributed to a 65% drop in Tesla shares last year, which wiped out more than 700 billion dollars of shareholder wealth — far more than the $14 billion swing in fortune that occurred between the company’s high and low stock prices during the August 7-17, 2018 period covered by the class action.

Tesla stock plummets

The lawsuit is based on the premise that Tesla shares would not have traded in such a wide range had Musk not suspended the prospect of buying the company for $420 per share. Tesla’s stock has split twice since then, making that $420 price now worth $28 on an adjusted basis. Shares closed last week at $122.40, down from their November 2021 adjusted high of $414.50.

After Musk scrapped the idea of ​​a Tesla takeover, the company overcame a production glitch, leading to a rapid recovery in car sales that sent its stock skyrocketing and made Musk the wealthiest person. of the world until he bought Twitter. Musk fell from the top spot on the wealth list after the stock market backlash to his handling of Twitter.

Elon Musk sells billions of Tesla shares after Twitter takeover


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

The drama could also shed light on Musk’s relationship with his brother, Kimbal, who is also on the list of potential witnesses who could be called in a trial that is expected to run until February 1.

With Tesla vehicle sales slowing and its stock price falling, the company on Friday heavily discounted prices on several versions of its cars, making certain models eligible for a new federal tax credit that could help spur buyer interest.

The company has cut prices by nearly 20% in the United States on some versions of the Model Y SUV, its bestseller. This reduction will make more Model Y versions eligible for a $7,500 electric vehicle tax credit that will be available through March. Tesla also slashed the base price of the Model 3, its least expensive model, by about 6%.

“We believe all of these price cuts could boost demand/shipments by 12% to 15% globally in 2023 and show that Tesla and Musk are going on the ‘offensive’ to drive demand amid a downturn.” , the Wedbush analyst said in a recent report. .

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