You’re here (TSLA) has fallen as the electric vehicle giant finds itself embroiled in a court case that will decide whether CEO Elon Musk’s 2018 tweets about taking Tesla from private investors cost billions of dollars.
The securities fraud trial drama unfolds this week in a San Francisco courtroom and is set to run until February 1. 1. The class action case largely revolves around an August. Tweet of 7 2018 by Musk.
“I’m considering privatizing Tesla at $420. Funding secured,” Musk wrote on Twitter.
Tesla shares had opened that day at 341, rising to 387 during the session. However, no such deal ever materialized. A Tesla stock investor, Glen Littleton, sued the EV company. The lawsuit alleges Musk’s tweets were false and cost investors billions by manipulating wide swings in Tesla stocks, options and bonds.
Lawyers for Tesla and plaintiffs made opening arguments on Wednesday on whether Musk’s tweet aimed at depriving the company of damages to shareholders. The trial is expected to resume on Friday.
Tesla stock fell 2% on Thursday in pre-trade. TSLA shares reversed opening gains on Wednesday and edged down 2% to 128.78.
What investors need to know about Tesla’s lawsuit
Musk said he was seriously considering taking Tesla private. He thought he had the backing of Saudi Arabia’s sovereign wealth fund, the public investment fund, to do so, according to court documents.
US District Judge Edward Chen, who is overseeing the San Francisco jury trial, previously ruled in April 2022 that Musk’s tweets about privatizing Tesla were inaccurate and reckless.
The Wall Street Journal reported that the case is unusual because securities fraud cases are usually resolved before they even reach the trial stage. According to the Wall Street Journal, Tesla and Musk could face an “uphill battle” in light of the judge’s preliminary ruling on the veracity of Musk’s statements.
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 at the center of the ongoing lawsuit.
Plaintiffs’ attorneys argued on Wednesday that “millions of dollars were lost” when Musk’s “lies were exposed”, according to Reuters.
Meanwhile, Musk’s lawyer said his client had been “serious” about taking Tesla private.
“You’ll learn very soon that it wasn’t a fraud, not even close,” Musk’s lawyer told Reuters.
After the plaintiffs’ opening statements and witnesses on Wednesday, the trial will adjourn on Thursday before returning on Friday. Musk could take a stand himself, according to court documents. Former Tesla board member Larry Ellison, co-founder of Oracle Corp, and current board member James Murdoch, son of Fox Corp chairman Rupert Murdoch, could also take the speech.
A nine-person jury will decide whether Musk’s tweets manipulated Tesla’s share price by playing into the status of the deal’s financing.
TSLA stocks appear mostly unperturbed by Tesla’s lawsuit. Tesla stock slid after a strong start on Wednesday, hitting resistance at a key level. However, TSLA shares have rebounded since January 1. 6 down or 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 also weighed on Tesla stock, cutting price targets.
Tesla is due to release its fourth quarter results on January 1. 25. Tesla China EV registrations have rebounded over the past week following recent steep price declines there. But it may be some time before investors have a clear idea of the impact of Tesla’s global price drops and demand. Tesla’s fourth-quarter revenue is expected on Jan. 1. 25.
However, the most recent registration numbers appear to reflect some benefits from the Jan. 6 decision to cut prices in China. Tesla has slashed prices for the Model 3 and Y in China, with the base Model 3 slashed more than 13% to $33,570. Local media in China suggested that Tesla had received 30,000 orders within three days of the announced cuts, according to CnEVPost.
On Friday, Tesla also announced steep price cuts in the United States and Europe. Tesla stock closed slightly lower on Friday, even as price cuts made more of the company’s models eligible for $7,500 tax incentives under the Cut Inflation Act.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
YOU MIGHT ALSO LIKE:
Top Funds Buy In No. 1 industry leader close to breakthrough with 364% growth
Gain an edge in the stock market with IBD Digital
Market reverses lower on hawkish Fed and weak economic data
Lithium stocks 2023: a cartel on the horizon?
Tesla stock in 2023: what will the electric vehicle giant do in its two megamarkets?