SAN FRANCISCO — Elon Musk faces a federal trial in San Francisco beginning Tuesday, as he and Tesla defend against claims of securities fraud from investors over Musk’s 2018 declaration he had “Funding secured” to take the electric vehicle company private.
It’s the latest challenge to Musk’s vast empire and fortune, months after the Tesla CEO took over another major tech company, Twitter, and installed himself as chief executive. Since then, his wealth has plummeted and Musk was recognized by Guinness World Records for sustaining the “worst loss of fortune in history” — shedding around $200 billion in the course of a year. He has fallen to number two in the ranking of the world’s richest people, according to Forbes.
Musk sent the now-infamous tweet on Aug. 7, 2018: “Am considering taking Tesla private at $420. Funding secured.” He followed it up with a subsequent post reading, “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote” — the other tweet referenced in court documents.
Musk has defended himself over claims his tweets were false, saying last year that he did have funding lined up at the time — from the Saudi Public Investment Fund, which Musk said had “committed unequivocally” to taking Tesla private. At that time, Musk had already settled with the SEC over the matter, paid a $20 million fine and relinquished his board chairmanship of Tesla, which paid a $20 million fine of its own.
The court in the shareholder suit has instructed jurors to assume Musk’s declarations of “Funding secured” and “Investor support is confirmed” are untrue.
The suit, initially brought in 2018, is a class action from Tesla investors alleging they lost huge sums of money after Tesla’s stock price soared and fell following the “Funding secured” tweet and the SEC’s subsequent investigation.
The surge in the share price cost Tesla short sellers hundreds of millions of dollars “when they were forced thereafter to cover their positions by purchasing Tesla securities at artificially inflated prices,” read the initial 2018 complaint.
Musk and his attorney didn’t immediately respond to a request for comment.
In the lead-up to the trial, Musk — who moved recently from Southern California to Austin — mounted an unsuccessful effort to have the trial moved from San Francisco to the Western District of Texas, arguing media coverage and publicity surrounding Musk’s business moves had “biased” the local jury pool. (Musk has laid off more than half of the staff of 7,500 since taking over Twitter, which is based in San Francisco.)
Musk faced other fallout from the aftermath of the tweet — as concerns mounted over his fitness to lead Tesla, and his penchant for controversy proved a drag on the company’s share price.
But a year later, many of Musk’s legal and financial questions were resolving in quick succession; the Tesla stock rallied in late 2019 and skyrocketed in 2020, as Musk emerged from the economic ravages of the covid pandemic as the world’s richest person, leading the most valuable automaker.