SAN FRANCISCO (AP) — Still grappling with the fallout from a company he did privatize, beleaguered billionaire Elon Musk is now on trial over a company he didn’t.
Long before Musk bought Twitter for $44 billion in October, he set his sights on Tesla, the electric car maker, where he continues to serve as CEO and from whom he derives much of his wealth and fame.
Musk stated in an August 7, 2018 tweet that he had lined up funding to pay for the $72 billion Tesla buyout, which he then reinforced with a subsequent statement that made the deal inevitable.
But the ransom never took place, and now Musk will have to explain his actions under oath in federal court in San Francisco. The trial, which begins Tuesday with jury selection, was sparked 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 triggered a surge in Tesla stock prices that abruptly ended a week after it became apparent he didn’t have the funds to buy back after all. This led him to abandon his plan to take the automaker private, leading to a $40 million settlement with U.S. securities regulators that also required him to step down as chairman of the company.
Musk has since claimed that he entered into the agreement under duress, and has claimed that he believes he blocked financial backing for a Tesla buyout during meetings with representatives of the Saudi Arabian Public Investment Fund.
The outcome of the trial may depend on the jury’s interpretation of Musk’s motives for the tweets, which US District Judge Edward Chen has already ruled to be false.
Chen gave Musk another setback on Friday when he rejected Musk’s proposal to take the trial to federal court in Texas, where Tesla is moving its headquarters in 2021. Musk claimed that the negative Twitter coverage of his purchase had poisoned the jury pool in San Francisco. Francisco Bay area.
Musk’s lead on Twitter, where he gutted staff and alienated users and advertisers, has proved unpopular with current Tesla shareholders, who are concerned that he is devoting less time to running the automaker at a time of increased competition. Those fears contributed to a 65 percent plunge in Tesla stock last year that wiped out more than $700 billion of shareholder wealth — far more than the $14 billion fortune swing that occurred between the company’s high and low stock prices during August 7. 17, 2018 the period covered by the class action.
The lawsuit is based on the premise that Tesla’s stock would not have traded in such a wide range if Musk hadn’t hesitated at the prospect of buying the company at $420 a share. Since then, Tesla shares have split twice, bringing the $420 price to $28 on an adjusted basis. The stock closed last week at $122.40 from a November 2021 adjusted peak of $414.50.
After Musk dropped the idea of a Tesla buyout, the company overcame a manufacturing problem, resulting in a rapid increase in car sales, causing its stock to skyrocket and making Musk the richest man in the world until he bought Twitter. Musk has slipped from number one on the wealth list following the stock market’s backlash against his Twitter handle.
The lawsuit is likely to provide insight into Musk’s management style, given that the witness list includes some of Tesla’s current and former top executives and board members, including luminaries such as Oracle co-founder Larry Ellison, as well as James Murdoch. , son of 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 called during the trial, which runs until Feb. 1.