Elon Musk’s tweets about taking Tesla private were false, new court says

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Elon Musk

Krisztian Bocsi | Bloomberg | Getty Images

In a court filed late Friday, shareholders who sued Tesla and CEO Elon Musk for alleged securities fraud said they won part of a pivotal ruling in their class-action lawsuit.

Shareholders are suing Tesla for money they lost after Musk tweeted in 2018 that he was considering taking his electric vehicle company private for $420 a share and said he had secured funding to do so.

Tesla stock trading initially halted, then shares were highly volatile for weeks following the tweets. Musk later said he had been in talks with Saudi Arabia’s sovereign wealth fund and was confident the funding would come at his proposed price. A deal never came.

The Securities and Exchange Commission has investigated and charged Musk with civil securities fraud as a result of those tweets. Tesla and Musk entered into a revised settlement agreement on those charges in 2019, but Musk is now trying to end that agreement.

Shareholders’ class action lawsuit could amount to billions of dollars that would be paid by Musk and Tesla to those who are members of the class.

Shareholders’ attorneys said on file Friday that Judge Edward M. Chen, who presides over the case, concluded that Musk had acted on scientific research — in other words, that he knowingly made false statements about securing funding. when he tweeted.

This information was revealed in a request by shareholders’ attorneys for a temporary restraining order against Musk to prevent him from making further public comments on aspects of the case, as he did during a much-watched appearance at the TED 2022- conference on April 14.

The request for the temporary restraining order refers to a previous ruling by Judge Chen that is currently under seal because it refers to evidence Musk’s team considered confidential. “We expect the injunction to be released shortly,” Adam Apton of Levi & Korsinsky, chief adviser to the class of Tesla shareholders, told CNBC by email.

At Thursday’s TED conference, Musk called financial regulators in the SEC’s San Francisco office “bastards.”

Musk also said, “The SEC knew the funding was secured, but they were conducting an active, public inquiry at the time. Tesla was in a precarious financial situation. And the banks told me if I didn’t agree with the SEC that “If you did, the banks would stop providing working capital and Tesla would go out of business immediately. So that’s like having a gun to your kid’s head. I was forced to illegally yield to the SEC.”

It’s not clear why Musk thought he might not have been able to get working capital for Tesla, but he was confident he could collect the billions needed to take the company off the market at the same time.

Musk is currently the richest person in the world on paper and is trying to take over Twitter, his favorite social media platform, and take it privately for about $43 billion.

Musk’s attorney Alex Spiro, a partner at Quinn Emanuel Urquhart & Sullivan, said in an emailed statement to CNBC: “Nothing will ever change the truth, which is that Elon Musk was considering taking Tesla private and could have — anything that half a decade later, his lawyers are left by arbitrary prosecutors trying to make money and others trying to prevent that truth from coming to light, at the expense of free speech.”

Spiro made the same statement to Bloomberg, which was the first to report on new developments in shareholder collective action.

A trial date is currently set for May 31, 2022, in a federal court in San Francisco, but that could change.

Levi & Korsinsky’s Apton told CNBC, “We look forward to proving the rest of our case at trial and recovering damages on behalf of the class.”



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