According to estimates filed Tuesday during a lawsuit investigating shoddy management of the buyout plan, investors lost billions of dollars when Elon Musk tweeted that he had the funding to take Tesla private in 2018.
During the final week of the three-week trial, a nine-member jury will face the mind-boggling numbers released by two experts hired by lawyers representing Tesla shareholders. Judge Edward Chen of the United States District Court plans to present the case to the jury this Friday.
Musk and his electric car could face further financial ramifications from his erratic behavior on Twitter, which he now owns. After Musk’s controversial tweets in August 2018, he and Tesla agreed to a $40 million deal with securities authorities without admitting wrongdoing.
Recently we reported on some Elon Musk related news; if you are interested in reading it, you can access the articles from the links below:
For the class action lawsuit filed on behalf of Tesla shareholders, the first question for the jury to answer is whether two of Musk’s tweets unexpectedly misled Tesla investors on August 7, 2018. If the jury agrees with Chen that Musk should pay for the fake tweets, they will have to determine how much Musk, one of the world’s wealthiest individuals, and Tesla should pay.
Economist Michael Hartzmark, one of Tuesday’s two pundits, reviewed a paper that used phrases like “but-for” and “consequential inflation” to argue that Tesla shareholders may have incurred losses of $4 billion to $11 billion, or $22.55 to $66.67 per share. over a period of 10 days in August 2018.
Steven Heston, a finance professor at the University of Maryland, reviewed an even more detailed report that looked at the effect Musk’s tweets had on more than 2,000 different Tesla stock options. The report relied heavily on a formula called the Black-Scholes Model, which is often used by companies to value executive compensation packages.
A lawyer for Musk questioned the accuracy of Heston’s model, and the actor responded: “All models deviate from reality, that is why they are models.” While Heston claimed to have received between $300,000 and $350,000 for his efforts in the case, he did not provide a specific estimate of investor damages, stating instead that it was the responsibility of the jury.
Musk’s tweet from August 7, 2018, in which he claimed to have “secured funding” to take Tesla private, is vital to the case. According to Musk’s testimony, he hurriedly sent the tweet minutes before boarding his private jet after being tipped off that the Financial Times was about to publish a story claiming that Saudi Arabia’s public investment fund had spent about $2 billion buying a 5% stake in Tesla to diversify its holdings beyond oil.
A few hours later, Musk followed up with another post suggesting a deal was imminent, leading many to wonder if his Twitter account had been hacked or if he was joking.
Musk testified under oath for about eight hours, claiming numerous times that he was acting in the best interests of Tesla shareholders and that he had a financial commitment from the Saudi fund, despite the fund’s subsequent retraction of his tweet saying ” financing secured”. Which is currently being removed by Elon Musk, however, the reason is still unknown we referenced the tweet image below.
Musk stated that he could have completed the purchase with further funding from investors and the sale of a portion of his stake in SpaceX. SpaceX is Musk’s rocket manufacturing company.
In the end, Musk and Tesla’s other major owners agreed that the electric manufacturer should remain public, a move that has paid dividends for all involved. Taking into account two stock splits that have occurred since Musk’s buyout tweet, the current value of a Tesla share is more than eight times what it was at the time of Musk’s tweet.
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