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In a lawsuit filed late Friday, shareholders suing Tesla and CEO Elon Musk for alleged securities fraud said they won part of a critical decision in their class action lawsuit.
Shareholders are suing Tesla for money they lost after Musk tweeted in 2018 that he was considering taking his electric vehicle company private at $420 a share and said he had secured funding to do so.
Trading in Tesla shares initially stalled, then shares were highly volatile for weeks following the tweets. Musk later said he had discussions with Saudi Arabia’s sovereign wealth fund and was confident the funding would come in at the proposed price. An agreement never materialized.
The Securities and Exchange Commission investigated and charged Musk with civil securities fraud following the tweets. Tesla and Musk reached a revised settlement agreement in 2019 regarding these charges, but Musk is trying to terminate that agreement now.
The damages from the shareholder class action lawsuit could amount to billions of dollars that would be paid by Musk and Tesla to those who are class members.
Lawyers for the shareholders said in the filing on Friday that Judge Edward M. Chen, who is presiding over that case, concluded that Musk acted knowingly — in other words, that he knowingly made false statements about the warranty. funding when he tweeted.
This information was revealed in a request that attorneys for the shareholders made for a temporary restraining order against Musk to prevent him from making any further public remarks about aspects of this matter, as he did during a a widely seen appearance at the 2022 TED Talk on April 14th.
The request for a temporary restraining order alludes to an earlier decision by Judge Chen that is currently under seal because it references evidence that Musk’s team considered confidential. “We expect the order to be released shortly,” Adam Apton of Levi & Korsinsky, Tesla’s senior shareholder class attorney, told CNBC via email.
At Thursday’s TED Talk, Musk called financial regulators at the SEC’s office in San Francisco “bastards.”
Musk also said, “The SEC knew the funding was secured, but they nonetheless conducted an active public investigation at the time. Tesla was in dire financial straits. And the banks told me that if I didn’t accept not settle with the SEC they would, the banks would stop providing working capital and Tesla would go bankrupt immediately It’s like having a gun to your kid’s head I was forced to concede to the SEC illegally.
It’s unclear why Musk felt he may not have been able to secure working capital for Tesla, but he’s confident he could raise the billions needed to take the company private at the same time. weather.
Musk is currently the richest person in the world on paper and is trying to acquire Twitter, his go-to social media platform, and take it private for around $43 billion.
Musk’s attorney, Alex Spiro, a partner at Quinn Emanuel Urquhart & Sullivan, said in a statement emailed to CNBC: “Nothing will ever change the truth that Elon Musk was considering taking Tesla private and allegedly pu – all that’s left about half a decade later It’s random plaintiffs’ lawyers trying to make money and others trying to stop this truth from coming to light, to the detriment of freedom of expression.”
Spiro made the same statement to Bloomberg, which first reported on the new developments in the shareholder class action lawsuit.
A trial date is currently set for May 31, 2022 in federal court in San Francisco, but that could change.
Apton of Levi & Korsinsky told CNBC, “We look forward to proving the rest of our case at trial and recovering damages on behalf of the group.”