Elon Musk’s 2018 proposal to privatise Tesla will be tried in court.
Elon Musk’s 2018 proposal to privatize Tesla will be tried in court. Elon Musk said he would take Tesla, his electric car company, private four years before he did it. The second richest person on the planet will have to defend those statements in court.
As a result of the announcement, Tesla’s stock price increased. As it became clear that a buyout wouldn’t happen, the price dropped again and continued to fall in the following days.
Read more: China Demands Optimism Lifts Most Gulf Markets.
A class action lawsuit was launched against Musk by shareholders who lost millions of dollars owing to the stock’s volatility between August 7 and August 17 of that year. Jury selection for the three-week trial begins today (January 17) in San Francisco.
If he loses, Musk, still one of the world’s wealthiest individuals despite suffering the most significant loss in personal fortune ever recorded, could be forced to pay millions in damages.
So that you know, here’s a quick rundown of Elon Musk’s Twitter spat with the SEC over the recent sale of Tesla:
Musk not only made a hasty announcement about a possible Tesla buyout but also doubled down on the possibility of a sale by saying that nothing more than a shareholder vote was needed. When asked what it would have meant for investors and staff, he wrote a blog post and announced that Goldman Sachs and Silver Lake would join the company as financial advisors.
However, Tesla was never taken private, and that decision appears to have been irrevocable.
The Securities and Exchange Commission (SEC) announced a settlement in the matter a little over a month after his controversial tweet in August 2018. The authorities claimed in a news release that Musk was aware the purchase would never go through. Musk was removed as chairman of Tesla and replaced by Robyn Denholm, a member of the Tesla board.
Musk claims he has been negotiating with Saudi Arabia’s national wealth fund for two years and that there is “no question” that a transaction will be finalized. In addition, he spoke out against the SEC settlement, claiming he was coerced into signing it. Since then, he has pushed back on the requirement that his lawyers review his tweets, claiming that this “government-imposed gag” on his expression is unconstitutional.
A breakdown of Musk’s plan to take Tesla private at $420 per share: Musk stated he would take Tesla private at $420 per share, an almost 20% premium over the company’s previous stock price.
The SEC claims that Musk’s “financing secured” tweet caused “substantial market disturbance,” as seen by the 6% increase in Tesla stock price on that day.
According to the lawsuit’s owners, Tesla’s shares fluctuated by $14 billion during the ten days at issue.
Due to Musk’s tweets, Glen Littleton believes he lost $3.5 million on his Tesla shares.
Musk and Tesla have agreed to pay $20 million in penalties, totaling $40 million, to compensate affected investors. Without admitting or rejecting the SEC’s charges, they settled.
Eighty-two percent (82%) of the 200 potential jurors who filled out the court’s pre-trial questionnaire and said they had an unfavorable impression of Musk
Yasir al-Rumayyan, chief executive of the Saudi Arabian Public Investment Fund, is a potential target.
Musk’s attorneys wanted Yasir al-Rumayyan to testify in favor of the billionaire and his claims of reaching a “handshake deal.” al-Rumayyan is the governor of the Public Investment Fund (PIF) and the chair of Saudi Aramco. Contrarily, al-Rumayyan has shown no willingness to do so.
Musk is disappointed at the public’s apathy about Rumayyan. Bloomberg reported in August 2018 that the PIF was in talks with Musk about taking Tesla private, but the Saudi fund did not confirm or deny the news. It was subsequently stated that Musk texted the phrase “you are throwing me under the bus” to the individual.
Musk has a tough case on his hands.
The jury’s verdict will depend on their assessment of Musk’s intent when writing the tweets. Is he seriously imagining that Tesla will be taken private? Could he have been making a play for the shorts in the market? To the experts’ surprise, Musk isn’t favored to win.
US district judge Edward Chen has shown little compassion for Tesla’s CEO, whatever the case’s conclusion may be.
He has made statements such as “the jury will be reminded that the Court has already found that the August 2018 tweets were false and made with the appropriate scienter.” (In the law, to be a “scienter” means to break the law intentionally.)
Separately, the judge denied Musk’s request to move the trial out of San Francisco to Texas because of the “local animosity” he faced in the city due to his controversial takeover of Twitter. According to Chen, the tech CEO has enough “friends” in San Francisco for an unbiased jury to be selected for him, just as it was for Theranos founder Elizabeth Holmes.
The trial will take place in California because that’s where Tesla’s headquarters were in 2018. (the company has since relocated to Texas). Shareholders’ counsel for Tesla agreed, saying that a change of venue might not make much of a difference if Musk’s notoriety sways the jury. After all, people in Austin, Texas, refer to him as “the worst resident.”
