Elon Musk will go on trial next week for his infamous case tweet he claimed to have provided financing to take Tesla private for $420 a share. A 10-day civil trial set for January 17 will begin with jury selection in the U.S. District Court for the Northern District of California.
In the classic lawsuit, Musk is alleged to have harmed investors by tweeting on August 7, 2018: “Thinking to take Tesla private at $420. Funding secured.” The lead plaintiff says additional disclosures by Musk and Tesla reinforced the false impression given by Musk’s claim of a personal nature.
“Investors lost billions of dollars between August 7, 2018 and August 17, 2018, as a result of the confusion in the prices of Tesla stock, options and bonds as a result of Musk and Tesla’s announcements,” lead plaintiff Glen Littleton said in an October court brief. he said. “These losses include losses resulting from the impact on Tesla stock prices immediately following the August 7, 2018 tweets, which were adjusted for the period between August 8, 2018 and August 17, 2018, due to investor manipulation of the tweets. Without Musk and Tesla’s false statements, Tesla investors would not have suffered these losses.”
Law professor Robert Miller told Ars he thinks Musk will lose, and the only question is how much he’ll have to pay in damages. “Elon is going to lose, and it’s going to lose a significant amount. We’re just talking about how much money,” said Miller, who is the F. Arnold Daum Chair in Corporate Finance and Law at the College of Iowa. Law. The case will determine “how much of inflation and deflation is attributable to fraud,” he said.
Another expert agrees. Minor Myers, a professor of corporate law at the University of Connecticut, told Reuters that “everything is set up here for the plaintiffs to win.” While Musk’s chances of winning outright are low, a plaintiff must still prove that his false statements directly caused investors’ losses in order to receive a substantial payout. They are seeking billions of dollars in damages for investors who bought Tesla shares at inflated prices and sold them at a loss.
Musk said in his filing that the plaintiff’s request is for $66.67 per share in damages, including the alleged effects of Musk’s tweets and “consequential effects” such as shareholder lawsuits and negative news. Musk disputes that account.
The $420 price suggested in Musk’s tweet was almost 20 percent higher than Tesla’s August 2, 2018 closing price of $349.54. “Musk believed that 20 percent was the ‘standard premium’ in private transactions,” the lawsuit says. “Although the exact estimate was $419.49, Musk rounded up the price to $420 per share because his girlfriend at the time, Claire Elise Boucher (also known as “Grimes”), thought the number would look funny because of the importance of marijuana users.”
The judge found the tweets false and reckless
Although the jury is still out in the case, District Judge Edward Chen has already issued an important ruling that makes it harder for Musk to win. In April 2022, Chen partially granted Littleton’s motion for summary judgment, ruling that Musk made negligent misrepresentations.
“The court finds, based on the evidence presented, that the first three representations in question are false and that there is no genuine dispute that Mr. Musk made these statements recklessly,” Chen’s ruling said. Chen only sided with Littleton in his fourth statement from Musk’s blog post on August 13, 2018, in which he described ongoing ties to the Saudi sovereign wealth fund.
The jury will be aware of this decision. As Chen wrote, “[T]he will tell the jury that the Court has already determined that the August 2018 tweets were false and were made with proper scienter.” (Scienter is the legal term for information about intent or wrongdoing.)
The first of three statements Chen deemed false and reckless was the famous tweet: “I’m considering taking Tesla private for $420. Funding secured.” Che’s ruling stated that “a reasonable jury could have reached only one conclusion—I meanMr. Musk carelessly tweeting publicly that funding has been secured.”