Elon Musk is going on trial next week over his infamous tweet claiming he secured funding to take Tesla private at $420 per share. A 10-day civil trial with jury selection is scheduled to begin on Tuesday, January 17 in the US District Court for the Northern District of California.
The class-action lawsuit alleges that Elon Musk harmed investors with this August 7, 2018 tweet: “I’m considering taking Tesla private for $420.” Musk and Tesla, the lead plaintiffs, say the additional statements reinforced the false impression given by Musk’s ongoing personal claims.
Investors lost billions of dollars from August 7, 2018 to August 17, 2018, as a result of the upheaval in Tesla stock, options and bond prices caused by statements by Elon Musk and Tesla, lead plaintiff Glen Littleton said in an October trial brief. Told. Said losses include losses from the impact on prices of Tesla securities shortly after the tweet on August 7, 2018, which was corrected from August 8, 2018 to August 17, 2018.
The falsehood of the tweets was felt by the investors. Absent Musk and Tesla’s fraudulent statements, these losses are not borne by Tesla investors. Law professor Robert Miller tells Ars he thinks Elon Musk will lose and the only outstanding question is how much he will have to pay in damages. “Elon is going to lose, and he’s going to lose for a long time.
We’re just talking about how much really is,” said Miller, who is the F. Arnold Daum Chair in Corporate Finance and Law at the University of Iowa College of Law. The case will determine whether “inflation amounts to fraud.” And how much deflation it causes,” he said.
Another expert agrees. “Everything looks set for a win for the plaintiffs here,” Minor Myers, professor of corporate law at the University of Connecticut, told Reuters. While Musk’s chances of winning outright may be slim, the plaintiffs will still have to prove their false statements directly harmed investors in order to receive a significant payout.
They are seeking billions of dollars in damages for investors who bought Tesla shares at inflated prices and sold them at a loss. An Elon Musk filing said the plaintiffs’ request is $66.67 in damages per share, which includes the alleged impact of Musk’s tweets and “consequential effects” such as shareholder lawsuits and negative news coverage. Kasturi disputes this count.
The $420 price suggested in Elon Musk’s tweet was a roughly 20 percent premium from Tesla’s closing share price of $349.54 on August 2, 2018. “Musk believed that 20 percent was a ‘standard premium’ in the private transaction,” the lawsuit said. Although the exact calculation equaled $419.49, Musk rounded the price up to $420 per share because he was thinking of Claire Elise Boucher, his girlfriend at the time.
Although a jury will decide the case, District Judge Edward Chen has already issued a ruling that makes it difficult for Musk to win. In April 2022, Chen granted Littleton’s motion for partial summary judgment, ruling that Elon Musk made recklessly false statements.
The Court believes that, based on the evidence presented, there is no genuine dispute that the first three representations at issue were false and that Mr. Musk made those representations negligently, Chen’s decision said. Chen only sided against Littleton on a fourth statement from a Musk blog post on August 13, 2018, in which he described ongoing communications with Saudi Arabia’s sovereign wealth fund.
The jury will be informed of that decision. As Chen wrote, “[t]he jury will be told that the court has already found that the August 2018 tweets were false and expected to be scientific.” (Scientific is a legal term for intent or knowledge of wrongdoing.)
The first of three statements Chen found to be false and reckless was the infamous tweet: I’m considering taking Tesla private for $420. Chen’s ruling said a reasonable jury could reach only one conclusion, namely that Mr Musk carelessly tweeted to the public that the funds were secure.