While still dealing with the fallout from a business he took privately, ailing billionaire Elon Musk now faces a lawsuit over a business he didn’t have.
Long before musk bought Twitter for US$44 billion (about Rs.3,37,465 billion) in October, he had his sights set on Tesla, the electric car maker he remains CEO of and from which he derives most of his wealth and fame.
Musk claimed in an Aug. 7, 2018 tweet that he had the funding for a $72 billion (approx Teslawhich he then reinforced with a follow-up statement that made a deal seem imminent.
But the acquisition never materialized, and now Musk must explain his actions under oath in federal court in San Francisco. The trial, which begins Tuesday with jury selection, was prompted by a class action lawsuit on behalf of investors who owned Tesla stock for 10 days in August 2018.
Musk’s tweets at the time fueled a rally in Tesla’s share price that ended abruptly a week later after it emerged that he didn’t have the funds for an acquisition after all. That led to his abandoning his plan to take the automaker private, culminating in a $40 million (approximately Rs. 327 billion rupees) settlement with US securities regulators that also required him to step down as chairman of the company .
Musk has since claimed he entered the settlement under duress, claiming he secured financial backing for a Tesla acquisition in meetings with officials from the Public Investment Fund of Saudi Arabia.
The outcome of the trial could depend on the jury’s interpretation of Musk’s motive for tweets, which US District Judge Edward Chen has already ruled untrue.
Chen dealt Musk another blow on Friday when he declined Musk’s offer to move the trial to a federal court in Texas, where Tesla is moving its headquarters in 2021. Musk had argued that negative media coverage of his Twitter purchase poisoned juries in the San Francisco Bay area.
Musk’s stewardship of Twitter — where he has gutted employees and alienated users and advertisers — has proved unpopular with Tesla’s current shareholders, who fear he has spent less time directing the automaker at a time of increased competition. Those concerns contributed to a 65 percent decline in Tesla stock over the past year, wiping out more than $700 billion (about Rs Rs.
The lawsuit is based on the premise that Tesla shares would not have traded in such a wide range if Musk had not raised the prospect of buying the company for $420 (around Rs. 34,000) a share. Tesla stock has since split twice, so the $420 price is now worth $28 (around Rs.2,200) on an adjusted basis. The stock closed last week at $122.40 (about Rs.9,900), down from its split-adjusted November 2021 peak of $414.50 (about Rs.33,800).
After Musk dropped the idea of a Tesla buyout, the company overcame a manufacturing problem, leading to a rapid upswing in auto sales that sent its stock skyrocketing and made Musk the richest person on earth until he bought Twitter. Musk fell from the top of the asset list after the stock market backlash over his dealings with Twitter.
The trial is likely to provide insight into Musk’s leadership style, as the witness list includes some of Tesla’s current and former top executives and board members, including luminaries like Larry Ellison, co-founder of Oracle, and James Murdoch, son of Tesla media mogul Rupert Murdoch. The drama could also shed light on Musk’s relationship with his brother Kimbal, who is also on the list of potential witnesses to be summoned during a trial set to last until February 1.
