Elon Musk’s trial for his tweets about Tesla begins

Elon Musk’s trial for his tweets about Tesla begins

“Secured Funding”. Those two words have been floating through Elon Musk’s mind for more than four years. He wrote to them in a tweet, assuring that he was considering delisting electric car maker Tesla. Musk even released the price of his proposed offering, $420 (the number for marijuana), and Tesla stock soared. But there was neither funding nor an offer. Musk agreed to a fine with his boss and now faces lawsuits seeking millions in damages.

The trial begins this Tuesday in San Francisco with jury selection. The owner of Twitter has tried unsuccessfully to move the process from there to Texas, where Tesla is now headquartered. Musk argued that a San Francisco jury could be biased against him, especially given the layoffs that have affected half of Twitter’s workforce and his messy takeover of the social network.

After his initial tweet on August 7, 2019, Musk, along with others, insisted that an upcoming surgery was proposed. “Shareholders can sell at 420 or keep the shares [en la compañía excluida de Bolsa]”, added first. And he returned to the accusation: “The support of the investors is confirmed. The only reason it’s not certain is because it depends on shareholder votes,” he later said. in another tweet. He even sent a message to staff explaining his plans.

The operation was never subject to a shareholder vote. Shares fell when it emerged that the offer had failed and the Securities and Exchange Commission (SEC) launched an investigation into apparent price manipulation. Musk agreed to leave Tesla’s presidency (although he remains CEO), accept a $40 million fine (divided in half between himself and the company), and monitor future tweets about the electric car maker. In another parallel case, Musk is now suing this part of the agreement because it violates his freedom of expression.

A man carries documents for the Tesla and Elon Musk shareholder trial next to the Phillip Burton Federal Building and the US Courthouse in San Francisco, California.A man carries documents for the Tesla and Elon Musk shareholder trial next to the Phillip Burton Federal Building and the US Courthouse in San Francisco, California.Benjamin Fanjoy (Bloomberg)

Tesla has doubled its shares since 2018. That $420 would equate to $28 for each of the current shares. The company has risen much more sharply in the stock market. It topped $400 in 2021 and is still trading around $130 even after the 2022 crash. So those who remained shareholders not only didn’t lose money, they multiplied it. Those claiming damages are investors who bought in the heat of potential supply and sold at a loss when that outlook was deflated.

While investigating the case, Musk and his lawyers have provided an exchange of messages with the head of Saudi Arabia’s sovereign wealth fund, who the tycoon claims is the one who would provide funding to launch the bid that Tesla is excluding from Bag. However, what this news shows is that Yasir Al-Rumayyan, the person in charge of the fund, had not reached a compromise. “We cannot approve something that we do not have enough information about,” he replied to Musk in one of his messages. The financing was therefore not “insured”.

After jury selection, the actual trial is scheduled to begin in February. Oracle founder Larry Ellison and James Murdoch, son of media mogul Rupert Murdoch, are on the witness list. But it will certainly be Musk’s own testimony that will draw the most attention.

The tycoon has another case pending in a Delaware court over the multimillion-dollar stock compensation he received as Tesla CEO, which a shareholder has challenged as abusive unjust enrichment. The trial for this more than 55,000 million compensation took place last November and a verdict is still pending.

Tesla will present its full-year results next week and will host an investor day in early March. The company lost two-thirds of its value on the stock market in 2022. It has disappointed with its sales because it has not been able to sell all the cars it has made. The company has been offering deep discounts to try to get rid of its inventory. But beyond the company’s failure to meet its short-term goals, the question is whether its dominant position in the electric vehicle market is sustainable over the long term.

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