Trial Over Musk's Tesla Tweets Begins

On Tuesday, a class action suit claiming Tesla shareholders were defrauded by tweets from CEO Elon Musk was scheduled to begin against the billionaire and his company in San Francisco.

Trial Over Musk's Tesla Tweets Begins
Image credit: Newsweek 

Facts

  • On Tuesday, a class action suit claiming Tesla shareholders were defrauded by tweets from CEO Elon Musk was scheduled to begin against the billionaire and his company in San Francisco.
  • Musk, who now owns Twitter, claimed in an Aug. 7, 2018 tweet that he had secured $72B in financing to take Tesla private; he then held firm to that notion in a follow-up tweet. Tesla’s stock price rallied until it was revealed a week later that he didn’t have the funding.
  • This trial is the result of a class-action suit filed by investors who owned Tesla stock for a 10-day period around Musk’s tweet, which is believed to have caused a $14B swing in wealth for investors during that time.
  • Musk subsequently paid a $40M settlement to the US Securities and Exchange Commission (SEC) and stepped down as CEO as part of his agreement. He has since claimed he entered the settlement under duress and that he had believed he had the funding from representatives of Saudi Arabia’s Public Investment Fund.
  • Jury selection was scheduled to begin Tuesday and the trial is expected to last until Feb. 1. The jury will have to determine whether or not US District Judge Edward Chen's claim that Musk's tweet was reckless is valid.
  • The trial comes as Tesla is dealing with financial challenges. Tesla’s stock has declined 65% in the last year, wiping out more than $700B in shareholder wealth. The company has also reduced the price of some of its vehicle models in the US by 20%.

Sources: Reuters, Al Jazeera, CBS, and Wall Street Journal.

Narratives

  • Narrative A, as provided by New York Times. Musk and Tesla are already behind the eight ball because of the judge’s summary judgment that the tweets were untruthful and recklessly shared. Neither Musk’s previous settlement with the SEC nor his erratic behavior since taking over Twitter has done him any favors, and this case is probably going to cost him another devastatingly large chunk of his fortune.
  • Narrative B, as provided by Fox News. There’s no way for Musk to get a fair trial. Tainted coverage of the situation surrounding his tweets, in addition to other reporting on his career, will sway the jury against him, which is why the judge should’ve allowed a change of venue. The plaintiffs should also be more appreciative that despite what might’ve happened around the tweets, their Tesla shares are now worth six times as much as they were valued back then.