Billionaire Elon Musk is facing trial over a firm he didn’t take private while still dealing with the ramifications of a company he did. Musk’s primary source of money and notoriety comes from Tesla, the electric automaker he founded and continues to lead as CEO. Musk paid $44 billion in October to acquire Twitter.
Musk tweeted on August 7 that he had secured the funding to pay for a $72 billion purchase of Tesla, and in a subsequent statement, he elaborated on this assertion and made it appear as though a transaction was near. However, the acquisition never occurred, and now Musk will have to give an under-oath explanation for his behavior in a San Francisco federal court. On Tuesday, the jury will be selected for a trial that was initiated by a class-action complaint filed on behalf of investors who held Tesla shares for ten days in August 2018.
A week later, when it became clear that Musk didn’t have the money for a buyout after all, the spike in Tesla’s stock price that had been spurred by his tweets at the time abruptly ceased. As a result, he abandoned his efforts to take the carmaker private, ultimately settling with U.S. securities authorities for $40 million and relinquishing his position as chairman of the board.
Musk has since claimed he was pressured into agreeing to that deal, and that he was under the impression that he had secured funding for a Tesla buyout during his discussions with the Public Investment Fund of Saudi Arabia. A verdict in Musk’s trial, which U.S. District Judge Edward Chen has already declared to be a lie, may rely on the jury’s assessment of his motivation for those tweets.
On Friday, Chen delivered Musk another blow by rejecting his request to shift the trial to a federal court in Texas, where Tesla plans to establish a new headquarters in 2021. Musk claimed the San Francisco Bay Area jury pool was tainted by the press’s coverage of his Twitter acquisition.
Tesla’s present owners are concerned that Musk has been dedicating less time to leading the manufacturer at a time of rising competition due to his leadership of Twitter, where he has culled the workforce and alienated fans and advertisers.
Concerns about the company’s financial stability led to a 65% drop in Tesla stock last year, wiping out over $700 billion in shareholder wealth. This was a much larger loss than the $14 billion difference between the company’s high and low stock prices during the August 7-17, 2018 time period covered by the class-action lawsuit.
The complaint is predicated on the idea that Musk’s offer to acquire Tesla for $420 per share caused the stock to trade at such a wide range. Given that Tesla’s stock has split twice since then, the $420 price is now equivalent to $28. In the wake of a stock split in November 2021, the price of the company’s shares skyrocketed to an all-time high of $414.50 before the market closed that week.
Musk became the wealthiest person in the world before he purchased Twitter when he abandoned plans for a Tesla takeover and the firm overcome a production hiccup, leading to a quick upturn in car sales. A response from the stock market to his use of Twitter caused Musk to fall off the top of the wealth rankings.
As several of Tesla’s current and past senior executives and board members, as well as notables like Oracle co-founder Larry Ellison and James Murdoch, son of media tycoon Rupert Murdoch, are scheduled to testify, the trial is likely to shed light on Musk’s management style. The trial is set to go until February 1, and prospective witnesses include Musk’s brother, Kimbal. This may shed insight into the nature of Musk’s connection with his sibling.
Last Lines
In addition to coping with the fallout from taking one business private, billionaire Elon Musk is also on trial for another. Musk is most known for founding and serving as CEO of electric manufacturer Tesla, which has been a major source of his wealth and fame.
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