Tesla CEO Elon Musk is being sued over a four-year-old Twitter post where he announced his plans to take the electric car manufacturing company private but ended it with, "Funding secured."
Musk, Tesla, and other Tesla directors are involved in the shareholder lawsuit in the 2018 tweet where he wanted to price each Tesla share at $420. If the billionaire ended his announcement at just that, there would be no coverage or lawsuit that seeks unspecified damages.
Elon Musk Faces Lawsuit
It was later revealed that the Tesla CEO had been in talks with executives of the Saudi sovereign wealth fund regarding the money that he needed at the time to take the company private, but the funding was anything but "secured."
On the day of his 2018 tweet, Tesla shares initially jumped 11%, but they never reached the promised $420 threshold, only peaking at $387.46. Soon after, the prices began to fall well below their prices before the Twitter post, sinking to $344, and to $263.24 after a month, as per CNN.
The prices per share continued to drop after it became clear that the funding that was supposedly secured was actually not. The situation prompted the shareholder suit that is just now reaching trial after more than four years.
After about a year since Musk's tweet, Tesla's shares went on an extraordinary run, turning from losses to profits and gaining 1,520% from the Twitter post's date to its record high in November 2021. The price close of $409.97 works out to be roughly $,6150 per share when adjusted for the two stock splits since that day.
Musk's 2018 tweet also prompted the Securities and Exchange Commission (SEC) to file a civil suit against the Tesla CEO. The SEC is the agency that is responsible for shielding investors by requiring executives to tell the truth about certain dealings.
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Reckless Statements
Since the fallout of his tweet, Musk has contended that he entered a $40 million settlement under duress and maintained that he believed he had locked up financial support for Tesla. The recent trial's outcome could also hinge on the jury's interpretation of Musk's motive for tweets that U.S. District Judge Edward Chen decided were a falsehood, according to CBS News.
On Friday, Musk was dealt another setback when Chen rejected the Tesla CEO's bid to transfer the trial to a federal court in Texas, where the company moved its headquarters in 2021. Musk argued that negative coverage of his Twitter purchase had poisoned the jury pool in the San Francisco Bay Area.
Current Tesla stockholders are unsatisfied with how Musk has recently taken control of Twitter where he fired hordes of staff and alienated users and advertisers alike. Stockholders of the electric car manufacturing company were concerned that Musk has been devoting less time to managing the automaker during a time of stiff competition.
Legal experts have expressed their belief that the trial would be a challenging legal battle for Musk and his company. Chen previously ruled that the billionaire was, in fact, "deliberately reckless" about the truth when making his 2018 statements, said the New York Times.
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