April 20, 2024

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Elon Musk is facing trial over his 2018 plan to own a private Tesla car

Elon Musk is facing trial over his 2018 plan to own a private Tesla car

More than four years after he said he secured the financing to take Tesla out of the stock market, Elon Musk will try to defend that statement in a trial that opens Tuesday in San Francisco federal court.

The case has been brought by investors alleging that Mr. Musk, the electric car company’s CEO, never actually raised the money to take Tesla private and acted recklessly in discussing the embryonic plan to do so. If the plaintiffs get a jury to rule in their favor, Tesla and Mr. Musk could be forced to pay billions of dollars in damages.

The trial focuses on what Mr. Musk said on Twitter, which he acquired in October. “I’m thinking of taking the Tesla private at $420. Financing secured,” he said. wrote in a post On August 7, 2018.

Tesla’s share price jumped after the tweet was posted but sank after the proposal failed. The plaintiffs, Glenn Littleton and other investors, maintain that Mr. Musk’s actions were responsible for the losses they incurred in Tesla stock movements.

The company, Mr. Musk and their attorneys defended the position and said it was not an act of recklessness.

Mr. Musk and Tesla have settled a separate lawsuit filed by the Securities and Exchange Commission over his plan to take the company private. They’ve paid fines to the Securities and Exchange Commission, and Mr. Musk has agreed to step down as Tesla chairman and to have an attorney review some statements he makes about the company on social media before they’re made public.

The investors’ lawsuit will come to trial in US District Court at a difficult time for Mr. Musk and Tesla. The company sells fewer cars than executives promised and analysts predicted, Force Tesla to cut prices. Twitter revenue fell Because many companies are no longer running ads on the platform after Mr. Musk’s erratic behavior and his decision to fire a large majority of the company’s employees.

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Legal experts said the case could be difficult for Mr. Musk and Tesla. The senior district judge hearing the case, Edward M. Chen, ruled last year that he agreed with plaintiffs that Mr. Musk’s 2018 Twitter posts about making Tesla private were false and that Mr. Musk was, in the words of investors, “willfully reckless” about Truth when making these statements.

“I really got summary judgment for recklessness and false statement,” said Adam Pritchard, a professor of law at the University of Michigan. “These are the two most common defenses to which defendants prevail.”

However, Judge Chen has not taken the side of the investors in other parts of their case — and that could give Mr. Musk a path to victory. Legal experts said plaintiffs must prove that the money they lost in Tesla stock was related to a statement from Mr. Musk that the court found false, such as the claim that he obtained the financing.

Mr. Musk could prevail if the jury finds that other statements he made were true and that those statements caused movements in Tesla stock.

In court documents, his attorneys have cited statements they believe fit that description. For example, Alex Spiro, one of Mr. Musk’s lawyers, asserted that the movements in Tesla stock may have been caused by his “indisputably correct” statement that he “was considering taking Tesla private.”

“Any ordinary defendant would settle this case,” said Mr. Pritchard, “but he has something worth trying.”

Tesla, Mr. Musk and Mr. Spiro did not respond to requests for comment.

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While Mr. Musk has always struggled to prove he has the financing to take Tesla private, he may seek to present new evidence and testimony in court that supports him. He confirmed that the Public Investment Fund in the Kingdom of Saudi Arabia agreed to provide financing.

Text messages between Mr. Misk and Yasser Al-Rumayyan, who oversees the Saudi fund, surfaced early last year in court files. The letters show Mr. Musk asking about the fund’s commitment to the deal. Mr. Al-Rumayyan replies that Tesla did not provide enough information.

“This is a very weak statement and does not reflect the conversation we had at Tesla,” Musk wrote in a text message in August 2018. “You said you were definitely interested in taking Tesla private and have wanted to do that since 2016.”

“It’s up to you, Elon,” replied Mr. Al-Rumayyan. In a later text, he added: “We can’t agree to something we don’t have enough information about.”

Mr. Misk’s legal team has summoned Mr. Al-Rumayyan and other employees of the Saudi Fund, seeking to force them to testify at trial. But lawyers for the fund told the court Thursday that the subpoenas were “legally flawed” and “frankly, frivolous.” The next day, Mr. Musk’s lawyers told the court that they were no longer pursuing subpoenas.

A spokesman for the Saudi Public Investment Fund did not respond to requests for comment.

Later in August 2018, Mr. Musk said in a blog post that Tesla would remain a public company.

The lawsuit dates back to a very different time for Tesla. In 2018, the automaker has been fighting mightily to ramp up production. Soon, the problems abated, and sales rose rapidly. The company started out so well that many investors thought it would dominate the auto industry. Tesla’s market capitalization has exceeded $1 trillion.

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But in the past year, investors have re-evaluated the company’s prospects as it reported disappointing sales numbers and Mr. Musk sold large amounts of stock to raise money for his Twitter acquisition. Tesla’s share price has fallen about 65 percent in the past year.

Mr. Musk and his attorneys have tried to delay the trial, including a request last week that Judge Chen transfer the case to the Western District of Texas, which includes Austin, where Tesla moved its headquarters in 2021. Local media has “satiated” the Bay Area, Tesla’s home, the lawyers said. the former, with “biased and negative stories about Mr. Musk” that would harm jurors. Judge Chen denied that request on Friday.

This isn’t Mr. Musk’s only legal battle.

In the United States Court of Appeals for the Second Circuit, he is trying to terminate parts of the The agreement he reached with the SEC In this appeal, Mr. Musk argues that settlement provisions that prevent his ability to make public statements about certain Tesla matters intrude on his First Amendment rights.

And in the court of Delaware Chancery, a Tesla shareholder tries to invalidate Huge compensation package awarded to Mr. Musk in 2018. A Delaware judge could announce a ruling in the coming weeks.