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Case Against Musk Over 2018 Tesla Privatization Plan Tweet Goes to Trial

S.J. Steinhardt
Published Date:
Jan 18, 2023

A case against Elon Musk over a Twitter statement he made in 2018, claiming that he had secured the funding to take Tesla private, went to trial in federal court in San Francisco on Jan. 17, the New York Times reported.

The case was brought by Glen Littleton and other investors in the electric vehicle company who incurred losses in the wake of Musk’s August 2018 tweet, “Am considering taking Tesla private at $420. Funding secured.”  The stock price initially jumped, but when, later that month, Musk announced that he would not take the company private, it sank. The plaintiffs claim that Musk’s actions were responsible for their losses.

If the jury rules in their favor, Musk could be liable for billions of dollars in damages.

The senior district judge hearing the case, Edward M. Chen, ruled last year that he agreed with the plaintiffs that Musk’s 2018 Twitter posts were false and “deliberately reckless,” as the investors claimed.

“You’ve already got summary judgment on recklessness and false statement,” Adam C. Pritchard, a University of Michigan law professor, told the Times. “These are the two most common defenses that defendants prevail on.”

The plaintiffs must demonstrate that their Tesla stock losses were due to a statement by Musk that the court finds to be false, such as the claim that he had the funding, legal experts told the Times. If the jury finds that other statements he made were true and responsible for Tesla’s stock movements, the plaintiffs may not win.

To bolster their case, Musk’s lawyers subpoenaed Yasir Al-Rumayyan, head of Saudi Arabia’s Public Investment Fund, which they said agreed to provide the financing. Yet text messages between Musk and Al-Rumayyan show Musk asking about the fund’s commitment to the deal, with the Saudi telling him that Tesla had not provided enough information.

Musk and Tesla previously settled a lawsuit brought by the Securities and Exchange Commission (SEC) over the privitaization plan. As part of the settlement, Musk and Tesla each paid $20 million fines and Musk relinquished his chairmanship of the company. He also agreed to have a lawyer look over some statements about the company on social media before he publishes them.

Reuters reported that Musk is now trying to terminate some of the parts of that agreement in a case before the U.S. Court of Appeals for the Second Circuit, arguing that his First Amendment rights are being violated by certain provisions of it.

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