January 28, 2023

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Tesla investors claim they were duped by Musk’s tweet — trial begins Tuesday

On August 7, 2018, Elon Musk wrote on Twitter that he was considering writing off Tesla at $420. And not only that. “Funding secured,” he continued, adding in a tweet later that day that the shareholder vote was the only reason the funding could not be secured.

The stock responded with a sharp rally, but fell again after a New York Times report on August 17 that financing was “far from safe.”

cost “billions”

Shareholders who bought or sold Tesla stock in the days after August 7 claimed they were duped by Twitter posts, and responded with a lawsuit. On Tuesday, the trial began in San Francisco, according to reports ReutersAnd that’s without shareholders specifying what compensation they want — except that Musk’s tweets have cost them “billions” of dollars.

The trial will be presided over by Judge Edward Chen, who called the Tesla founder’s tweets “untrue” and “reckless.” According to the news agency, he must decide whether Musk’s words were important to investors, and if he acted willfully, he should be ordered to pay compensation — and if so, how much.

The Saudi fund in the back?

Musk wanted to move the trial to Texas, arguing that too many potential jurors would be too biased after all the negative media coverage in the wake of his Twitter takeover last October. Chen denied the request, but the jury nominees, according to Reuters, were asked what they thought of Musk and whether they owned a Tesla.

The defendants, who include seven current and former Tesla executives, have pleaded not guilty to the charge. According to court documents, they will argue that Musk had good reason to believe the funding had been secured. It is said that the director of the Saudi government investment fund PIF, Yasser Al-Rumayyan, after several meetings between the two parties, encouraged Musk to take Tesla public, offering to invest up to $60 billion.

Dual stock split

According to the news agency, Musk can be found in the witness box at the trial, which is expected to last about three weeks.

Finally, we note that Tesla stock has split twice since Musk wrote the much-discussed tweet. The price of $420 in 2018 corresponds to just $28 today as splits have resulted in a 15-fold increase in shares.

Tesla also rose more than 6 percent to $129.90 in early Wall Street trading on Tuesday, after Goldman Sachs reiterated its buy recommendation. The share is still down more than 60 percent in the past 12 months.