Elon Musk’s ‘funding secured’ tweet begins lawsuit

Opening arguments will begin on Wednesday in a trial that will see Tesla face-to-face with shareholders accusing the company of misleading them over Elon Musk’s tweet saying funding was “secured” for in order to take the electric car company private.

Lead shareholder plaintiff Glen Littleton is seeking billions of dollars in damages over an August 2018 tweet that caused a brief surge in the value of Tesla’s stock. The company’s shares began a steady decline, which continued into the following year.

The fallout led to an investigation by federal regulators. Musk and Tesla were fined $20 million separately, and Musk was forced to step down as chairman of Tesla’s board. He also agreed to a demand that lawyers review his statements about Tesla before posting them on social media.

Elon Musk arrives at the Met Gala on May 2, 2022 in New York.
Elon Musk arrives at the Met Gala on May 2, 2022 in New York.Angela Weiss/AFP via Getty Images File

Last May, Judge Edward Chen, who oversees the trial, ruled Littleton and the other plaintiffs in summary judgment that Musk’s remarks about the private property deal were false and reckless. A jury in Northern California will now determine whether Musk knowingly made a false statement, how the tweet affected the share price, and what the damage was.

“Here, everything is set for the plaintiffs to win,” Minor Myers, who teaches corporate law at the University of Connecticut, told Reuters.

This case is unusual because most class action securities lawsuits are either dismissed or settled out of court. Hundreds of U.S. securities class actions have been filed every year since the current laws governing the cases went into effect in 1996, but according to the law firm Wolf Popper LLP, only 15 court verdicts have resulted in judicial verdicts.

If the shareholders ultimately win the case and receive damages, experts say it will likely be years before they can recover the damages through the appeal process.

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