Tesla (TSLA) stock has fallen as the EV giant finds itself involved in a court case that will decide whether CEO Elon Musk’s 2018 tweets about taking Tesla private cost investors billions of dollars.
The securities-fraud lawsuit drama is playing out in a San Francisco courtroom this week and is scheduled to run through Feb. 1. The class-action case revolves largely around an Aug. 7, 2018 tweet by Musk.
“Am considering taking Tesla private at $420. Funding secured,” Musk wrote on Twitter.
Tesla shares had opened that day at 341, jumping to 387 during the session. However, no such deal ever materialized. A Tesla stock investor, Glen Littleton, has south the EV company. The lawsuit alleges Musk’s tweets were false and cost investors billions by manipulating big swings in Tesla stock, options and bonds.
Attorneys for Tesla and for and the plaintiffs made opening arguments Wednesday on whether Musk’s tweet to take the company private damaged shareholders. The trial is expected to resume Friday.
Tesla stock dropped 1.3% to 127.10 Thursday in market trade. It marked the second straight session of losses after TSLA shares reversed opening gains Wednesday and edged down 2% to 128.78.
What Investors Should Know About Tesla Lawsuit
Musk has said he truly was considering taking Tesla private. He thought he had the support 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, has already ruled in April, 2022, that Musk’s tweets about taking Tesla private were inaccurate and reckless.
The Wall Street Journal reported that the case is unusual because securities-fraud cases are typically resolved before ever reaching the trial stage. Tesla and Musk could face an “an uphill battle” in light of the judge’s pretrial decision about the veracity of Musk’s statements, according to the Wall Street Journal.
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 the center of the current lawsuit.
Lawyers for the plaintiffs argued Wednesday that “millions of dollars were lost” when Musk’s “lies were exposes,” according to Reuters.
Meanwhile, Musk’s lawyer said that his client had been “serious” about taking Tesla private.
“You will come to learn very soon that this was not fraud, not even close,” Reuters reported Musk’s lawyer saying.
After opening statements and plaintiff witnesses Wednesday, the trial will have Thursday off before returning Friday. Musk may take the stand himself, according to court documents. Former Tesla board member Larry Ellison, Oracle Corp co-founder, and current board member James Murdoch, son of Fox Corp Chair Rupert Murdoch, could also take the stand.
A jury of nine will decide if Musk’s tweets manipulated Tesla’s share price by playing up the status of funding for the deal.
TSLA shares seem mostly unperturbed by the Tesla lawsuit so far. Tesla stock slipped after a strong start Wednesday, hitting resistance at a key level. However, TSLA shares have been rebounding from a Jan. 6 low of 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 have also weighed in on Tesla stock, cutting price targets.
Tesla is due to report fourth-quarter earnings on Jan. 25. Tesla China EV registrations bounced in the latest week following recent big price cuts there. But it may be some time before investors get a clear picture of the impact of Tesla’s global price cuts and demand. Tesla earnings for Q4 are due on Jan 25.
However, the most recent registration numbers appear to reflect some benefit from Tesla’s Jan. 6 decision to cut prices in China. Tesla slashed prices for the Model 3 and Y in China, with the base Model 3 cut more than 13% to $33,570. Local media reports in China suggested Tesla had received 30,000 orders within three days of the announced cuts, according to CnEVPost.
On Friday, Tesla also announced big price cuts in the US and Europe. Tesla stock closed modestly lower Friday, even as the price cuts made more of the company’s models eligible for tax incentives of $7,500 under the Inflation Reduction Act.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Top Funds Buy Into No. 1 Industry Leader Near Breakout With 364% Growth
Get An Edge In The Stock Market With IBD Digital
Market Rally Suffers Key Losses; Netflix Pops On Strong Subscriber Growth
Lithium Stocks 2023: A Cartel On The Horizon?
Tesla Stock In 2023: What Will The EV Giant Do In Its Two Megamarkets?
#Tesla #Stock #Investors #Latest #Elon #Musk #Trial