Elon Musk failed in an attempt to get a trial moved out of the Bay Area because of what he and his attorneys perceive to be a "poisoned" jury pool, and now he will face a lawsuit here brought by Tesla investors who are still sore about tweets he published four years ago claiming he was about to take the car company private.
As you surely know by now, Elon Musk has had a longtime obsession with Twitter and his ability to court and entertain an audience with the often flippant musings of a billionaire. These days he's the reluctant owner of Twitter, a company he says he is on the verge of bankruptcy, after purchasing a majority stake and taking it private last year. But back when he was just the CEO and major shareholder of Tesla — along with a couple other ventures — he dashed off some tweets about securing funding to take Tesla private at a specific share price, which, when it didn't pan out, greatly impacted the value of Tesla's stock.
Both securities fraud charges from the Securities and Exchange Commission (SEC) and a class-action lawsuit from investors ensued, and this week, Musk will head to trial over those misguided tweets. Call it his first expensive mistake stemming from being impulsive on Twitter.
Musk paid up a $20 million fine to the SEC, and Tesla also had to pay another $20 million in the settlement — and that was all just resolved in April 2022, right at the same time that Musk was claiming he had secured funding to take Twitter private, which he ultimately succeeded in doing, though not without drama and backpedaling. After paying the fine, he publicly aired his grievances calling the SEC a bunch of "bastards" at a public event, and saying the settlement only happened because banks were refusing to do business with him until he settled — comparing the situation to "like having a gun to your child's head."
Musk's attorneys have also accused the SEC of "overreach" when it comes to Musk.
It should be noted that just a few months after those tweets about taking Tesla private, Musk got slapped again by the SEC over a February 2019 tweet he posted about Tesla's production capacity for that year, which the agency found was a violation of his earlier settlement in which he agreed to stop tweeting about the company.
As the Associated Press reports, the "beleaguered billionaire Elon Musk" will face trial from Tesla investors over his August 2018 tweets, which the plaintiffs say cost the company billions of dollars in value. Jury selection in the federal case is set to begin Tuesday.
But, as the AP notes, Tesla investors have far more reason to be upset with Musk over his Twitter takeover, which arguably led to a drop in share value for Tesla over the last year that wiped out $700 billion in shareholder wealth — a far cry from the $14 billion dip that occurred due to the August 2018 tweet debacle.
It will be up to Musk's legal team now to convince a jury that Musk's motives were pure and that he sincerely believed he had locked up funding to take Tesla private via Saudi Arabia’s Public Investment Fund. U.S. District Judge Edward Chen put Musk under a gag order about this case last April, when investors suggested he was trying to influence potential jurors with all of his public statements.
A jury will then have until February 1 to hear evidence about whether Musk acted recklessly with his tweeting, and whether his statements could be considered false — which Chen essentially already ruled was the case.
As the Wall Street Journal suggests, this trial is fairly unusual in that SEC violations like this are typically resolved outside of court. If Musk loses, he stands to owe these Tesla shareholders damages for the amount of stock value lost as a result of his tweets.
Last week, Musk's effort to get the trial moved to Texas due to potential juror prejudice against him here was unsuccessful, with Judge Chen ruling that it was reasonable to assume they could find 15 unbiased jurors — nine jurors and six alternates.
Per the Journal, 50 jurors out of 190 who filled out questionnaires last week will be brought in for questioning Tuesday, and opening arguments could begin as early as Tuesday depending on how long jury selection takes.
Top image via Unsplash