Tesla (TSLA) stock fell Wednesday as attorneys for the EV giant readied to make opening arguments in a court case that will decide whether CEO Elon Musk’s 2018 tweets about taking Tesla private cost investors billions of dollars.
The securities-fraud lawsuit drama is playing out in a San Francisco courtroom this week and is scheduled to run through Feb. 1. The class-action case revolves largely around an Aug. 7, 2018 tweet by Musk.
“Am considering taking Tesla private at $420. Funding secured,” Musk wrote on Twitter.
Tesla shares had opened that day at 341, jumping to 387 during the session. However, no such deal ever materialized. A Tesla stock investor, Glen Littleton, has sued the EV company alleging Musk’s tweets were false and cost investors billions by manipulating big swings in Tesla stock, options and bonds.
Attorneys for Tesla and for and the plaintiffs will make opening arguments Wednesday on whether Musk’s tweet to take the company private damaged shareholders.
Tesla stock reversed opening gains and edged down 0.2% to 130.67 during Wednesday’s market trading.
What Investors Should Know About Tesla Lawsuit
Musk has said he truly was considering taking Tesla private. He thought he had the support of Saudi Arabia’s sovereign-wealth fund, the public investment fund, to do so, according to court documents.
U.S. District Judge Edward Chen, who is overseeing the San Francisco jury trial, has already ruled in April, 2022, that Musk’s tweets about taking Tesla private were inaccurate and reckless.
The Wall Street Journal reported that the case is unusual because securities-fraud cases are typically resolved before ever reaching the trial stage. Tesla and Musk could face an “an uphill battle” in light of the judge’s pretrial decision about the veracity of Musk’s statements, according to the Wall Street Journal.
Musk and Tesla both agreed in 2018 to pay $20 million to settle civil charges brought by the Securities and Exchange Commission (SEC) over the same tweets that are the center of the current lawsuit.
After opening statements Wednesday, the plaintiffs are expected to begin calling witnesses to take the stand. Musk may take the stand in the case, according to court documents, along with former board member Larry Ellison, Oracle Corp co-founder, and current board member James Murdoch, son of Fox Corp Chair Rupert Murdoch.
A jury of nine will decide if Musk’s tweets manipulated Tesla’s share price by playing up the status of funding for the deal.
TSLA shares seem mostly unperturbed by the Tesla lawsuit. Tesla stock slipped after a strong start Wednesday, but has been rebounding from a Jan. 6 low of 101.81.
On Tuesday, TSLA shares jumped 7.4% to 131.49. Tesla stock has moved slightly above technical support at its 21-day moving average, but remains well below the 50-day and especially the 200-day lines. A number of analysts have also weighed in on Tesla stock, cutting price targets.
Tesla China EV registrations bounced in the latest week following recent big price cuts there. But it may be some time before investors get a clear picture of the impact of Tesla’s global price cuts and demand. Tesla earnings for Q4 are due on Jan. 25.
However, the most recent registration numbers appear to reflects some benefit from Tesla’s Jan. 6 decision to cut prices in China. Tesla slashed prices for the Model 3 and Y in China, with the base Model 3 cut more than 13% to $33,570. Local media reports in China suggested Tesla had received 30,000 orders within three days of the announced cuts, according to CnEVPost.
On Friday, Tesla also announced big price cuts in the U.S. and Europe. Tesla stock closed modestly lower Friday even as the price cuts made more of the company’s models eligible for tax incentives of $7,500 under the Inflation Reduction Act.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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