A federal court in San Francisco (California, United States) on Tuesday filed a lawsuit against Elon Musk and Tesla in which several investors are seeking multimillion-dollar settlements for a 2018 tweet in which the CEO of the electric vehicle maker claimed to have collected funds to take the company public, which never materialized, after which an investigation was launched.
This Tuesday’s session was dedicated to jury selection, which could conclude during the day or continue throughout the week. The shareholders who filed this class action claim that these statements caused them to lose billions of dollars due to the swings they caused in the company’s price and allege that Musk was lying when he made that announcement.
“I’m considering taking Tesla public at $420. Financing secured,” said the controversial tweet in which Musk referred to the per-share price he could offer in the deal, which would have valued the company at around $72 billion.
A precedent in the Securities and Exchange Commission fine
In principle, Musk and Tesla start at a disadvantage, given that the judge in charge of the case, Edward Chen, had already considered proven last year that the tweet in question and others he published since were “false and misleading”. Furthermore, already in 2018 Musk was accused by the US Securities and Exchange Commission (SEC) of fraud for his publication on Twitter and the entrepreneur accepted a fine of 20 million dollars as a penalty and leave the role of chairman of the company’s board of directors, while continuing to be its chief executive officer.
In its complaint, the SEC accused Musk of falsely claiming he has the ability to delist Tesla by securing “a multi-million dollar transaction” with just one shareholder vote. “The reality and the truth is that Musk had not even discussed, let alone confirmed, the key terms of the deal with any potential funding source,” the SEC filing stated.
“The plaintiffs allege that these tweets were false and artificially influenced the price of Tesla and other stocks,” Judge Edward Chen summed up when speaking to jury nominees. On Friday, the magistrate declined to transfer the case to Texas, the southern state where Musk has resided since he transferred Tesla from California. His defense argues that the billionaire will not get due process in San Francisco, where he bought Twitter in late October and has been widely criticized for his decisions on the social network.
The investors who filed the lawsuit bought or sold Tesla stock in the days immediately following the company boss’s announcement and are seeking unspecified compensation for a situation that they say has collectively cost them billions of dollars. It’s not the only time a tweet from Musk has automatically lowered Tesla’s price.
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