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While still struggling with the fallout from the company he took personally, beleaguered billionaire Elon Musk is now facing a trial about the company he didn’t take.
Before Musk bought Twitter for $44 billion in October, he had considered Tesla, the electric car maker where he continues to be CEO and from which he gained much of his wealth and fame.
Musk claimed on August 7, 2018, in a tweet that he had “safe funds” to pay for the $72 billion purchase of Tesla, which he later amplified with a follow-up statement that made the deal seem close.
But the purchase never happened and Musk now has to explain his actions under oath in US federal court in San Francisco. The trial, which began Tuesday with jury selection, was triggered by a class-action lawsuit on behalf of investors who owned Tesla shares for a 10-day period in August 2018.
Shareholders have not yet determined the damages, but said Musk’s tweets cost investors “billions.”
Change of venue offer rejected by the judge
Musk’s 2018 tweets led to a rally in Tesla’s stock price that abruptly ended a week later, after it appeared that he did not have the funds to buy it. This led to him canceling plans to take private cars, which eventually led to a $40 million settlement with US securities regulators that also required him to step down as chairman of the company.
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Musk has since insisted that he entered into the settlement under duress and believes he has locked in financial support for the purchase of Tesla during a meeting with representatives of Saudi Arabia’s Public Investment Fund.
The outcome of the trial may depend on the jury’s interpretation of Musk’s motives for the tweet that US District Judge Edward Chen has ruled was false and “reckless.”
Chen on Friday rejected Musk’s offer to transfer the trial to federal court in Texas, where Tesla will move its headquarters in 2021. Musk has argued that negative coverage of his Twitter purchase has poisoned the jury pool in the San Francisco Bay Area.
Musk’s leadership on Twitter – where he has lashed out at staff and alienated users and advertisers – has proven unpopular among Tesla’s current shareholders, who worry he has devoted less time to driving the car amid increasing competition.
Those concerns led to a 65 percent drop in Tesla shares last year that wiped out more than $700 billion in shareholder wealth — more than the $14 billion in fortunes that occurred during the August 2018 period covered in the class-action lawsuit.
The lawsuit is based on the premise that Tesla’s stock wouldn’t be trading in the range if Musk didn’t interfere with the prospect of buying the company for $420 a share. closed at 122.40 US Dollars.
The names are high on the witness list
After Musk dropped the idea of buying Tesla, the company overcame production problems, resulting in a rapid increase in car sales that sent its stock soaring and made Musk the richest man in the world until he bought Twitter.
The trial will provide insight into Musk’s management style, as the witness list includes some of Tesla’s current and former top executives and board members, including Larry Ellison, the founder of Oracle, as well as James Murdoch, the son of media mogul Rupert. Murdoch.
The drama could also explain Musk’s relationship with his brother, Kimbal, who is also on the list of potential witnesses in the trial scheduled until February 1.
It is unusual for such cases to proceed to verdict. Hundreds of US securities class actions have been filed each year since 1996, but only 15 have resulted in a trial verdict since then, according to law firm Wolf Popper.
About half were fired for failing to comply with securities laws, and many others have been terminated.
Musk, also CEO of SpaceX and co-founder of companies OpenAI and Neuralink, is no stranger to the courtroom.
He defeated a libel case in 2019 before a California jury for allegedly defaming a famous Thai cave explorer when he called the man a “pedo” in a tweet.
He also won a bench trial in Delaware Chancery Court last year over claims by Tesla shareholders that he allegedly pressured the Tesla board to buy SolarCity, a maker of rooftop solar panels. Tesla shareholders appealed the ruling.
Last year, he fought an ultimately losing battle to scuttle a deal to buy Twitter, and he defended Tesla’s $56 billion payout in a bench trial. Both are in the same Delaware court and a decision is expected later this year on the salary package.
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