Elon Musk’s Tesla Tweets Could Cost Him Billions More in 2023

If Elon Musk loses a class-action lawsuit of this scale, he might face billions of dollars in damages.

Elon Musk

Elon Musk

It just took a few tweets to drag Elon Musk into the quagmire of a securities fraud trial, which may cost him billions of dollars from his quickly dwindling fortune.

The Tesla Inc. CEO is scheduled to be the key witness in a jury trial that begins Tuesday in federal court in San Francisco over his notorious tweets four and a half years ago about a plan to take the electric-car company private with “funding secured.”

Lawyers for the shareholders will aim to persuade jurors that Musk lied in his testimony, causing them significant losses due to erratic stock price movements during a 10-day period before the plan was scrapped. Musk’s legal team will seek to discredit that story.

According to Adam Pritchard, a law professor at the University of Michigan,Elon Musk may face billions of dollars in damages if he loses a class-action lawsuit.

“Elon enjoys a good brawl,” Pritchard said. “He has a lot of money and looks to be willing to gamble with it.”
The trial comes as Elon Musk’s fortune has fallen from a high of $340 billion in November 2021. Despite investing $44 billion in Twitter Inc, he became the first person in history to lose more than $200 billion. He was dethroned as the world’s wealthiest person last month, and Tesla’s stock has plunged 37% since December 1, as the electric vehicle manufacturer faces increased competition and a possible recession.

The August 2018 tweets are best recognised for putting Elon Musk in the crosshairs of the US Securities and Exchange Commission. It led to Musk promising that his future social media posts will be reviewed by a Tesla lawyer.

Investors must demonstrate that Elon Musk was aware of his tweets’ deception and that they were “material,” or essential to a reasonable investor. Shareholders would also need to establish a link between Musk’s comments and their trading losses.

US District Judge Edward Chen has already hampered Elon Musk with a pretrial judgement that the tweets were reckless and fraudulent and he will instruct the 12-member jury to do so from the start in order to define the terms of the trial.

According to Pritchard, Elon Musk is at a “significant disadvantage” as a result of the jury instruction.

To counter charges of dishonesty,Elon Musk has stated in court filings that he may bring on others who can swear to the take-private plan, including friend and confidant Larry Ellison, as well as officials from Goldman Sachs, Morgan Stanley, and private-equity company Silver Lake Management.
Elon Musk’s lawyers have repeatedly sought to convince Chen not to share his discovery with the jury, stating last week that it may be “very harmful” to the CEO’s defence.

Elon Musk’s lawyer declined to comment before the trial began, and the shareholders’ attorney did not respond to a request for comment.

Elon Musk has stated that his ill-fated attempt to take Tesla private was based on conversations with Saudi Arabia’s national wealth fund. He summoned the governor of the Kingdom’s Private Investment Fund to testify at the trial, but dropped the order after Yasir Al-counsel Rumayyan’s claimed that he is not legally required to appear.

It’s unclear if Al-Rumayyan would be useful to Elon Musk as a witness. According to court records, the Tesla CEO stated that he believed they had achieved a handshake deal on funds to take the business private, but the Saudi official stated that he needed more information to make a judgement.

Determining Elon Musk’s mental state will be difficult and complicated. Ordinary investors realise that agreements may be completed even if they are not completely nailed down, according to Pritchard. Musk may have had faith in his ability to take Tesla private, even if he wasn’t quite there yet.

Elon Musk is a doer; he gets things done,” Pritchard explained. “If he says he’s going to take Tesla private, he’s going to take Tesla private in his mind. Did you ever decide that you wanted to launch a rocket into space? Elon did it. He completed the task. He has faith in Elon. He’s a little insane. That is part of his success formula. Because he’s Elon Musk, he could believe it.”

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