Elon Musk
Christian Bocci Bloomberg | Getty Images
In a lawsuit filed late Friday, shareholders who are suing Tesla and CEO Elon Musk for alleged securities fraud said they had won part of a critical decision in their class action lawsuit.
Shareholders are suing Tesla for money they lost after Musk tweeted in 2018 that he was considering making a private electric vehicle company priced at $ 420 a share, and said he had secured funding for it.
Trading in Tesla shares initially stopped, after which the shares were highly volatile weeks after the tweets. Musk later said he had been in discussions with the Saudi sovereign wealth fund and was confident that the funding would come at the price he offered. The deal never materialized.
The Securities and Exchange Commission is investigating and accusing Musk of fraud in civilian securities as a result of these tweets. Tesla and Musk have reached a revised settlement agreement in 2019 for these allegations, but Musk is trying to end the deal now.
The damage from a collective lawsuit of shareholders could amount to billions of dollars that Musk and Tesla would pay to those who are members of the class.
Shareholders’ attorneys said in a filing on Friday that Judge Edward M. Chen, who presides over the issue, concluded that Musk had acted scientifically – in other words, that he knowingly made false statements about secured funding when he tweeted.
This information was revealed in a request made by shareholders’ lawyers for a temporary restraining order against Musk to stop him from making additional public remarks on aspects of this case, as he did during a widely publicized statement at the TED 2022 conference on April 14.
The request for a temporary restraining order hints at an earlier decision by Judge Chen, which is currently in the press, as it cites evidence that Musk’s team considers confidential. “We expect the order to be published soon,” Adam Upton of Levi & Korsinsky, a leading shareholder advisor at Tesla, told CNBC by email.
At a TED conference on Thursday, Musk called financial regulators at the SEC’s San Francisco office “bastards.”
Musk added: “The SEC knew the funding was secured, but they were still conducting an active public inquiry at the time. Tesla was in a precarious financial situation. And I was told by the banks that if I did not agree to settle with the SEC, they would do so, the banks would stop providing working capital and Tesla would go bankrupt immediately. So it’s like putting a gun in your child’s head. I was forced to give up the SEC illegally. “
It is unclear why Musk believes he may not be able to raise working capital for Tesla, but he is confident he can raise the billions needed to make the company private at the same time.
Musk is currently the richest man in the world on paper and is trying to acquire Twitter, his chosen social media platform, and make it private for about $ 43 billion.
Musk’s attorney, Alex Spiro, Quinn partner Emanuel Urquhart & Sullivan, said in a statement emailed to CNBC: “Nothing will ever change the truth that Elon Musk was considering taking Tesla privately and could do it – everything What is left half a decade later are the occasional lawyers of the plaintiffs, who are trying to make money, while others are trying to block this truth from revealing everything to the detriment of freedom of speech. ”
Spiro gave the same statement to Bloomberg, which was the first to announce the news in the collective lawsuit of the shareholders.
The trial date is currently set for May 31, 2022 in federal court in San Francisco, but that may change.
Apton of Levi & Korsinsky told CNBC: “We look forward to proving the rest of our case in the process and repairing the damage on behalf of the class.”
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