Tesla chief Elon Musk may lose billions in a securities fraud trial underway in San Francisco over his past tweets about taking his electric car company private.
In the notorious 2018 tweet, Mr Musk had said he was “considering taking Tesla private at $420”, adding that he had “secured” funding for the bid.
In the current lawsuit, shareholders who traded Tesla stock in the days following the tweet are suing the world’s second richest person for billions of dollars in damages.
The shareholders’ lawyers say Mr Musk’s tweets led to “regular people” losing “millions and millions of dollars,” The Verge reported.
The US Securities and Exchange Commission’s rules note that publicly traded companies must not announce their financing plans if their executives do not intend to complete it, or if they lack a “reasonable belief” that it will be completed.
So the Trial’s outcomes seemingly depend on the language and intent of Mr Musk’s tweet.
Mr Musk had explained in a 2018 blog post that he had strongly expressed his support for “funding a going private transaction” for Tesla at a meeting with Saudi officials.
“I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement,” he explained.
In the days following his infamous tweet, Mr Musk accused the governor of the Saudi kingdom’s Public Investment Fund (PIF) of throwing him “under the bus.”
The Tesla titan’s lawyers reportedly argue that he did want to take the EV company private and that funding “wasn’t going to be an issue,” but the potential investors in Saudi Arabia had backed out.
In April last year, however, US District Court Judge Edward Chen had however said Mr Musk’s tweets were “false and misleading” adding that the Tesla boss “recklessly made the statements with knowledge as to their falsity.”
Tesla’s share price in the 10-days following the tweet had even changed by about $14 billion, indicating the Tweets had an effect.
Mr Musk’s lawyers say he had chosen his words – “funding secured” – poorly in his Tweet, arguing they were his “informal, sporadic thoughts,” but added that his words “did not matter” ultimately.
The Tesla chief’s lawyer Alex Spiro reportedly said tweets “don’t move the market.”
Tesla and Mr Musk could lose billions of dollars if the jury rules against him, according to The Verge.
While the trial could last about three weeks, the parties may also agree to settle at any time as do a large number of securities fraud trials in the US.
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