Investors of Tesla Inc. are on the brink of recovering losses stemming from a consequential tweet made by Elon Musk in 2018, wherein he asserted having “funding secured” to privatize Tesla at $420 a share. The United States Securities and Exchange Commission (SEC) has taken a pivotal step toward compensating these investors, agreeing to disburse a total of $40 million plus interest as part of the resolution of a lawsuit involving Musk and the SEC.
The settlement, aligning with the outcome of a lawsuit brought forth by a class of Tesla investors, comes in the wake of expert witness calculations that pegged the losses inflicted by Musk’s tweet at a staggering $12 billion. Notably, this figure eclipses the SEC’s preliminary estimate of $80 million. The SEC’s assessment of damages is circumscribed to Tesla common stock, focusing on a specific 27-hour period following the tweet. Consequently, the pool of eligible claims is limited to 3,350, each poised to garner an average of $12,400 from the settlement fund.
The culmination of the case was marked by a jury’s swift dismissal of the investors’ fraud allegations against Musk in a mere two hours back in February. Although the investors have since lodged an appeal, it is contingent upon the absence of objections from Musk or Tesla. An announcement made late on Wednesday revealed that the presiding judge intends to greenlight the plan on September 1, provided neither of the aforementioned entities raise opposition.
Recalling events from 2018, both Musk and Tesla acquiesced to a civil penalty of $20 million to be paid to the SEC. Among the stipulations of the settlement was a requirement for Musk to subject any company-related posts on Twitter to monitoring by a Tesla attorney. Despite the pending approval of the current settlement, Musk has voiced his belief that this arrangement infringes upon his right to free speech. His subsequent legal challenge in this regard was rejected by a federal appeals court in May.
The conclusion of this case underscores the legal clash between Musk, Tesla, and the SEC, shedding light on the profound impact wielded by CEOs and the paramount significance of accurate communication between corporate executives and investors. With the horizon now cleared for the impending settlement, Tesla investors are positioned to recoup the damages incurred as a result of Musk’s tweet.
Source: Bloomberg
