Breaking News
Investing Pro 0
⚠ New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

Tesla SEC Deal Ruled Off-Limits in Musk Tweet-Fraud Trial

Stock Markets Dec 07, 2022 22:36
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Bloomberg. Elon Musk departs from federal court in Los Angeles, on Dec. 3, 2019. 2/2
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

(Bloomberg) -- Elon Musk has never been a fan of the settlement he reached with the US Securities and Exchange Commission over his infamous 2018 tweet about having secured funding to take Tesla (NASDAQ:TSLA) Inc. private.

Lucky for the billionaire chief executive officer, that deal can’t be used as ammunition against him and the electric car-maker when investors take them to trial in January. A federal judge on Wednesday ruled it would be unfair to introduce Musk’s accord with the regulator as evidence for the jury that will decide whether the false tweet defrauded investors.

While Musk and Tesla quickly settled the SEC case for $40 million without admitting wrongdoing — and with a promise that the CEO would have his tweets vetted by a Tesla lawyer before posting them — the investor case could set them back more than $1 billion if they lose the trial.

The ruling may give Musk and Tesla some leverage in talks aimed at resolving the dispute before the class-action trial kicks off Jan. 17. 

US District Judge Edward Chen in San Francisco brushed away the argument by investors that the jury must learn about both the SEC investigation and settlement as part of its evaluation of the losses they suffered from wild swings in Tesla’s stock price attributed to Musk’s tweets.

“It would be confusing and artificial for the jury to be kept in the dark about its conclusion,” lawyers for the investors argued in a court filing.

Lawyers for Musk and Tesla argued that dredging up the SEC case at trial would “corrupt the jury’s evaluation” of the shareholder case. 

Chen said he won’t bar lawyers for the investors from telling the jury about the SEC’s investigation, which made headlines the day after Musk’s initial go-private tweets. But the judge ruled that telling jurors that the probe resulted in a lawsuit and a settlement more than a month later might create “unfair prejudice” against Musk and Tesla.

Investors contend Tesla’s CEO was intentionally deceitful when he tweeted the go-private proposal to his millions of Twitter followers on Aug. 7, 2018, adding that the transaction was buttressed by “funding secured.” 

Lawyers for shareholders have never publicly revealed how much they’re seeking in damages for hundreds of investors. A recent court filing by Musk and Tesla cited “billions” at stake.

Musk insists investors are wrong to accuse him of manipulating the stock price and maintains that his short-lived plan to take Tesla private was solid based on discussions he had with Saudi Arabia’s Public Investment Fund.

The judge made it significantly easier for the investors to prevail when he ruled in April that the “funding secured” tweet was false and reckless.

Musk in September asked a federal appeals court to throw out the so-called Twitter Sitter provision of his SEC settlement, calling it an illegal effort to muzzle him.

The world’s richest person complained that the pressure he faced to settle with the regulator was “like having a gun to your child’s head.”

The case is In re Tesla Inc. Securities Litigation, 18-cv-04865, US District Court, Northern District of California (San Francisco).


(Updates with judge’s reasoning)

©2022 Bloomberg L.P.

Tesla SEC Deal Ruled Off-Limits in Musk Tweet-Fraud Trial

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email