Still grappling with the fallout from a company he did delist, beleaguered billionaire Elon Musk now faces a lawsuit over a company he failed to acquire.
Long before Musk bought Twitter for $44 billion in October, he had set his sights on Tesla, the electric car maker where he still serves as CEO and from which he derives most of his wealth and fame. Musk claimed in an August 7, 2018 tweet that he arranged the financing to pay for a $72 billion buyout of Tesla, which he then bolstered with a follow-up pronunciation making a deal seem imminent.
But the buyout never went through and now Musk will have to explain his actions under oath in a federal court in San Francisco. The process, which begins Tuesday with jury selection, was triggered by a class action lawsuit on behalf of investors who owned Tesla stock for a period of 10 days in August 2018.
Musk’s tweets at the time caused a rally in Tesla’s share price, which ended abruptly a week later after it emerged that he did not have the funding for a buyout after all. That resulted in him scrapping his plan to take the automaker private, culminating in a $40 million settlement with U.S. securities regulators that also forced him to step down as the company’s chairman.
Musk has since claimed he entered into that settlement under duress, claiming he believed he had locked in financial support for a Tesla buyout during meetings with Saudi Arabia’s public investment fund representatives.
The outcome of the trial may depend on the jury’s interpretation of Musk’s motive for tweets that U.S. District Judge Edward Chen has already ruled to be untrue.
Chen delivered another setback to Musk on Friday when he rejected Musk’s offer to transfer the lawsuit to a federal court in Texas, where Tesla is moving its headquarters in 2021. Musk had argued that negative coverage of his Twitter purchase has blown the jury pool in the San Francisco Bay area.
Musk’s leadership on Twitter — where he has gutted the workforce and alienated users and advertisers — has proved unpopular with Tesla’s current shareholders, who fear he’s spent less time steering the automaker in a time of increasing competition .
Those concerns contributed to a 65% percent drop in Tesla shares last year, wiping out more than $700 billion in shareholder wealth — far more than the $14 billion swing in fortune that occurred between the high and low share prices of the company. company during the August 7. Period of December 17, 2018 covered by the class action lawsuit.
Tesla shares fall
The lawsuit is based on the premise that Tesla’s stock wouldn’t have traded so widely if Musk hadn’t balked at the prospect of buying the company for $420 a share. Tesla’s stock has since split twice, making that $420 price now worth $28 on an adjusted basis. Shares closed at $122.40 last week, down from the November 2021 split-adjusted high of $414.50.
After Musk dropped the idea of a Tesla buyout, the company overcame a manufacturing problem, resulting in a rapid surge in car sales that sent his stock soaring and made Musk the richest person in the world until he bought Twitter. Musk dropped from the top spot on the wealth list following the stock market’s backlash to his handling of Twitter.
The trial is likely to 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 celebrities such as Oracle co-founder Larry Ellison, as well as James Murdoch, the son of media mogul Rupert Murdoch.
The drama may also shed light on Musk’s relationship with his brother Kimbal, who is also on the list of possible witnesses to be called at a trial scheduled for February 1.
With sales of Tesla vehicles slowing and the stock price plummeting, the company slashed prices on several versions of its cars on Friday, making some models eligible for a new federal tax credit that could boost buyer interest.
The company slashed prices in the US by nearly 20% on some versions of its best-selling Model Y SUV. That reduction will make more Model Y versions eligible for a $7,500 electric vehicle tax credit that will be available through March. Tesla also cut the base price of the Model 3, the cheapest model, by about 6%.
“We believe all of these price cuts could boost global demand/supply by 12%-15% in 2023 and show Tesla and Musk going on the ‘offensive’ to boost demand against a weakening backdrop,” said Wedbush- analyst in a recent report. .
The report that Elon Musk must face court over his Tesla tweets first appeared on TBEN News.