April 18, 2022

Judge rules Musk's tweet on taking Tesla private was misleading, investors say-

categories : auto

Company's shareholders claim key win in the run-up to a fraud trial with billions of dollars in damages at stake

Tesla shareholders suing over Elon Musk's 2018 tweet about taking the company private said they won a key ruling in the run-up to a fraud trial with billions of dollars in damages at stake.

The investors said a federal judge agreed with them that “no reasonable jury could find Mr Musk’s tweets on August 7, 2018 accurate or not misleading”, according to a court filing on Friday. The filing describes an April 1 order by the judge that is not listed on the docket.

Alex Spiro, a lawyer for Mr Musk and Tesla, said “nothing will ever change the truth, which is that Elon Musk was considering taking Tesla private and could have”.

“All that’s left some half-decade later is random plaintiffs’ lawyers trying to make a buck and others trying to block that truth from coming to light all to the detriment of free speech,” he said on Saturday.

The ruling, if not challenged, will put the electric-car maker at a big disadvange in a San Francisco jury trial set for late May because Tesla will not be allowed to argue the controversial Twitter post was truthful. It will allow investors to focus mainly on connecting Mr Musk’s statement to their stock market losses.

The decision is also a blow to the credibility of the world’s richest person as he continues to wage legal battles that other chief executives would avoid or settle. Adding to the spectacle, Mr Musk is making a hostile bid to take control of Twitter on a pledge to make the platform a bastion of free speech.

Mr Musk told a New York federal judge in early March he “would never lie to shareholders”. He is asking that judge to free him from the social media restrictions he agreed to after the Securities and Exchange Commission sued him for fraud over the 2018 tweets.

In San Francisco, the shareholders suing over securities fraud are urging US district judge Edward Chen to prohibit Mr Musk from making any more public comments about his “interpretation and opinions” of the claims in their lawsuit until after the trial is finished.

The investors took specific aim at comments Mr Musk made during a TED event this week in Vancouver. He said “I was forced to concede to the SEC unlawfully” and settle the agency’s lawsuit over the 2018 “funding secured” tweet.

Shareholders argue that Mr Musk’s “indisputably false” August 2018 tweet and follow-up posts on Twitter cost them billions of dollars amid wild swings in Tesla’s stock price, while Mr Musk’s lawyers countered that the post to his millions of followers was “entirely truthful”.

Lawyers for the shareholders said Mr Chen was “explicit and unambiguous” in siding with them in the judge’s April 1 order finding the August 2018 tweet to be false.

The judge concluded Mr Musk “recklessly made the statements with knowledge as to their falsity”, the lawyers said on Friday.

Nicholas Porritt, a lawyer for the plaintiffs, said the judge’s order was not issued publicly and was shared with the parties on April 12.

“Because it refers to evidence that defendants regarded as confidential, the court preliminarily filed the order under seal while the parties agree what portions, if any, need to stay under seal,” Mr Porritt said.

Court officials could not immediately be reached to confirm the judge’s order.

The case is In re Tesla Securities Litigation, 18-cv-04865, US District Court, Northern District of California (San Francisco).

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