Christian Boxy | Bloomberg | Getty Images
In a lawsuit late Friday, shareholders suing Tesla and CEO Elon Musk over alleged securities fraud said they won part of a crucial ruling in a class action lawsuit.
Shareholders are suing Tesla over money they lost after Musk tweeted in 2018 that he was considering making his electric car company private at $420 per share, and said he had secured funding to do so.
Tesla shares initially stopped trading, then the shares were extremely volatile for weeks after the tweets. Musk later said he had held discussions with Saudi Arabia’s sovereign wealth fund and felt confident that the funding would come at the rate he proposed. A deal that did not materialize.
The Securities and Exchange Commission investigated and charged Musk with civil securities fraud as a result of those tweets. Tesla and Musk entered into a revised settlement agreement in 2019 over the accusations, but Musk is trying to end that agreement now.
The damages from the shareholder class action could amount to billions of dollars that Musk and Tesla will pay those who are members of the class.
Lawyers for the filing’s contributors said Friday that Judge Edward M. Chen, who is chairing the matter, concluded that Musk had acted with a scientist — in other words, he had knowingly made false statements about securing the funding when he tweeted.
This information was disclosed in a request by shareholder lawyers for a temporary restraining order against Musk to prevent him from making further public remarks about aspects of the case, as he did during his wide appearance at the TED 2022 conference on April 14.
The temporary restraining order request alludes to an earlier ruling by Judge Chen that is now sealed because it refers to evidence that Musk’s team has deemed classified. “We expect the matter to be published soon,” Adam Upton of Levi & Korsinsky, the principal advisor to the Tesla shareholder class, told CNBC via email.
At a TED conference on Thursday, Musk called financial regulators in the San Francisco office of the Securities and Exchange Commission “bastards.”
Musk also said, “The Securities and Exchange Commission learned that the funding is secured but they nonetheless pursued an active public investigation at the time. Tesla was in a precarious financial position. The banks told me that if I did not agree to a settlement with the if the SEC was You would, the banks would stop providing working capital and Tesla would go bankrupt immediately. It’s like putting a gun to your child’s head. I had to illegally cede to the Securities and Exchange Commission.”
It’s not clear why Musk feels he may not have been able to get working capital for Tesla, but he is confident he can mobilize the billions needed to make the company private at the same time.
Musk is currently the world’s richest person on paper, and is trying to acquire Twitter, his social media platform of choice, and make it private for about $43 billion.
Alex Spiro, Musk’s attorney, partner at Cowen Emmanuel Urquhart & Sullivan told CNBC, “Nothing is ever going to change the truth. Elon Musk was thinking about taking Tesla private and it could be.” “The plaintiffs’ lawyers are trying to make money and others are trying to prevent the truth from emerging, all at the expense of freedom of expression,” he added.
Spiro made a similar statement to Bloomberg, who reported on new developments in the shareholder class action.
The trial is currently set for May 31, 2022, in federal court in San Francisco, but that could change.
“We look forward to proving the rest of our case at trial and recovering damages on behalf of the class,” Upton of Levi & Korsinsky told CNBC.