A US court has ruled that Elon Musk’s 2018 tweets saying funding had been secured to take Tesla private were inaccurate and reckless, delivering a major victory to investors who alleged the billionaire artificially inflated stock prices.
US District Judge Edward Chen of San Francisco found that “there was nothing concrete” about financing from Saudi Arabia’s sovereign wealth fund at that time.
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Musk in 2018 met with representatives of Saudi Arabia’s Public Investment Fund and discussed taking Tesla private, but evidence shows that “there was nothing concrete about funding coming from the PIF,” the judge wrote.
“Rather, discussions between Tesla and the PIF were clearly at the preliminary stage.
“No reasonable jury could find that Mr. Musk did not act recklessly given his clear knowledge of the discussions,” he said.
Chen said details such as the total amount of funding needed to take Tesla private or the price to be paid for Tesla stock were not discussed.
The summary judgement, made on April 1, was sealed for more than a month before it was made publicly available on Tuesday.
“It is hugely significant,” shareholder lawyer Nicholas Porritt, a partner at Levi & Korsinsky LLP, told Reuters.
He said it is rare that class action plaintiffs get summary judgement on falsity and scienter – referring to statements that are knowingly or recklessly false – before going to a jury trial.
The remaining issue is what damages the intentionally false statement has caused to shareholders, he said.
The judge refused to grant shareholders summary judgement on the question of whether or not the allegedly false statements actually impacted Tesla’s share prices.
Musk’s lawyer, who has filed motions to undo the court decision, was not immediately available for comment. Musk said recently that funding was actually secured to take Tesla private in 2018.
The latest ruling was in line with a complaint from the US securities regulator which sued Musk for securities fraud over the tweets in 2018. Musk settled with the US Securities and Exchange Commission, stepped down as Tesla chairman, paid fines and agreed to have a lawyer approve some of his tweets before posting them.