Elon Musk’s 2018 tweets stating finance had been obtained to take Tesla private were misleading and reckless, according to a US court, who stated that “there was nothing definitive” about financing from Saudi Arabia’s sovereign wealth fund at the time.
The pre-trial judgment by US district judge Edward Chen in San Francisco was a big win for investors in a case alleging the world’s wealthiest person of inflating stock prices by making false and misleading statements, resulting in billions of dollars in damages.
Chen gave the shareholders summary judgment on the question of whether Musk willfully made misleading claims, but not on the question of whether these statements had an impact on Tesla’s stock price.
Musk met with officials from Saudi Arabia’s Public Investment Fund in 2018 to discuss taking Tesla private, but evidence proved that “there was nothing specific about funds coming from the PIF,” according to the judge.
“Rather, talks between Tesla and the PIF were clearly in the early stages,” Chen explained.
“Given his apparent awareness of the discussions, no reasonable jury could infer Mr Musk did not act carelessly,” the court added.
Details like the overall amount of financing required to take Tesla private or the price to be paid for Tesla stock, according to Chen, were not mentioned.
The summary ruling, which was issued on April 1, was kept under seal for more than a month before being made public on Tuesday.
“It’s tremendously significant,” Levi & Korsinsky LLP shareholder attorney Nicholas Porritt told Reuters.
A court deciding that a defendant deliberately made false claims in summary judgment before a jury trial is exceptional, according to Porritt. The final question, according to Porritt, is how much damage the purposefully inaccurate statement has caused to shareholders.
Musk’s lawyer did not immediately react to a request for comment after filing papers to overturn the court’s judgment. Musk announced last month that money was in place to take Tesla private in 2018.
Chen’s decision followed the US Securities and Exchange Commission’s complaint. Musk was sued by the Securities and Exchange Commission in 2018 for tweet-related fraud. Musk then reached an agreement with the SEC, standing down as Tesla chairman, paying fines, and agreeing to have certain of his tweets approved by a lawyer before being posted.